`PEZA clueless on locators' investments'

THE Philippine Economic Zone Authority (PEZA) has been found to be uninformed about actual investments made by locators who benefit from tax benefits, the Department of Finance (DoF) reported on Wednesday.

PEZA, however, denies the claims.

In a statement, the agency said the Fiscal Incentives Review Board (FIRB) Secretariat reported to its chairman, Finance Secretary Carlos Dominguez 3rd, that PEZA has not tracked the inflow of actual investments made by its registered business enterprises (RBEs) since the implementation of the Corporate Recovery and Tax Incentives for Enterprises (Create) Act to determine if they are commensurate with the value of fiscal incentives that such ecozone locators enjoy each year.

When the PEZA was ordered to report data to the FIRB as part of the compliance of investment promotion agencies (IPAs) with the provisions of Create, the FIRB Secretariat said PEZA presented inadequate information regarding the investment capital and market orientation of its locators.

“PEZA did not give us the data on the actual investment. They said they are not monitoring that,” Assistant Secretary and FIRB Secretariat head Juvy Danofrata was quoted as saying in the report.

The DoF said Danofrata emphasized that 12 of the 196 PEZA-RBEs lacked information on their investment capital, and 11 did not indicate their market orientation.

Only 4 out of 14 IPAs were able to substantially comply with the FIRB's reportorial obligations as stipulated by Create as of April 30 this year or over 10 months after the implementing rules and regulations for the law were signed.

Bases Conversion and Development Authority, John Hay Management Corp., Poro Point Management Corp. and the Phividec Industrial Authority are the four IPAs.

“These reports are important to enable the FIRB to fulfill its monitoring and oversight function over the IPAs and the overall administration and grant of tax incentives,” Danofrata noted.

She added that these IPA reports are shared with other government agencies, including the Bureau of Internal Revenue, for monitoring, auditing and other purposes in line with Create's goals.

Danofrata further said the FIRB Secretariat has already sent follow-up letters to IPAs with missing or incomplete filings.

The Finance department said the Board of Investments tallied the biggest amount of investment capital, totaling P43.12 billion, with 136 RBEs, based on what the FIRB Secretariat has gathered so far. Of these RBEs, nine are export-oriented and 127 are domestic-oriented.

Danofrata said the IPAs, which include PEZA, were able to register a total of 348 entities as of April 30, with 100 being export-oriented and 237 being domestic-oriented.

“The real estate, services and manufacturing sectors are the industries with the highest number of registered firms. Of the 348 firms, 25 have no information on their industry classification,” she said.

There were 129 RBEs in the real estate sector, 73 in the services sector and 68 in manufacturing.

PEZA denies claims

In a statement, PEZA denied the FIRB's claims, noting that the agency is properly monitoring actual investments.

“PEZA is confident that benefits of incentives to investments outweigh the foregone taxes; hence, we find the statement by FIRB particularly erroneous, misleading and intends to embarrass PEZA as an investment promotion agency (IPA),” PEZA Director General Charito Plaza said.

PEZA explained that prior to the enactment of Create, it submits its monthly reports on Approved Foreign Investments to the Office of the Secretary-Department of Trade and Industry and, on a quarterly basis, to the Philippine Statistics Authority (PSA).

The agency added that this is the accepted practice for all IPAs, including PEZA, to monitor the committed investments of enterprises.

“The PSA posts on its website its quarterly reports on approved foreign investments based on the consolidated submission of the IPAs. When the Create Act took effect in April 2021, the FIRB is now included on the monthly submission of our reports,” PEZA said.

PEZA said the reports required to be submitted by registered business enterprises under the Tax Incentives Management and Transparency Act of 2015 (TIMTA) do not include a column for actual investments but is limited only on the annual tax incentives report on income-based incentives and VAT, excise tax and duty-based incentives.

It noted that the requirement to monitor the approved and actual amount of investments of the RBEs is a report imposed only under the Create Act under Section 205 with the filing of annual benefits reports.

The agency said the RBES already submitted reports to the FIRB on June 15, 2022 while PEZA has until July 15, 2022 to submit reports to the FIRB.

“In fact, the FIRB just conducted its virtual town hall meetings with the IPAs and the RBEs in May 2022 informing us about the revised TIMTA reports, which now includes annual investments. In addition, from April 2021 to May 2022, PEZA has approved 128 projects/activities under the Create Act but only 18 or a mere 14 percent of these projects have started their commercial operations,” PEZA said.

“Accordingly, for the FIRB to state that PEZA does not monitor the inflow of actual investments is irresponsible and smacks of bad faith,” it added.