PEZA expects slowdown in new investments in 2019

The Philippine Economic Zone Authority (PEZA) expects new investments to decline in the country as investors wait and see how the second tax reform package and uncertainties related to next year’s  mid-term elections play out.

Under the proposed Tax Reform for Attracting Better and High Quality Opportunities (TRABAHO) or the second package of tax reforms, the Duterte administration to gradually lower the corporate income tax rate from 30 percent to 20 percent over 10 years.

The second tax reform package intends to rationalize corporate fiscal incentives by repealing 123 laws and consolidating them into one omnibus incentive code.

“For new investments medyo bababa tayo because of the wait-and-see attitude of investors on what will happen to TRAIN 2 and because of the election year,” PEZA Director-General Charito Plaza told GMA News Online on Tuesday.

TRAIN is the Tax Reform for Acceleration and Inclusion.

Incentives enjoyed by PEZA manufacturers and other locators, such as zero-value added tax rate on local purchases, four to six-year income tax holidays, and 5 percent tax on gross income once the tax break expires, are under threat by the second tax reform measure.

In the first nine months of the year, investment commitments in PEZA declined by 55 percent to P87.85 billion from P196.46 billion a year earlier.

Plaza blamed the decline on the “wait-and-see” stance of investors ahead of the final version of the tax reform package.

The PEZA chief said the slowdown will continue until the second half of next year as the mid-term elections add to the uncertainties investors perceive.

“Every election, there is always a halt in new investments because they are worried there might be some changes in policies,” Plaza said.

News investment will start coming in once the elections are finished and if there is a clearer picture of the tax reform measure, she said. —VDS, GMA News