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Clark investors want same incentives as granted by PEZA

Investors in Clark Freeport Zone (CFZ) have urged the Department of Finance to amend an order that restricts them from exhausting all available tax incentives being offered by the government to investors outside of Clark saying the order would discourage existing investors from expanding their operations within the freeport.

The Joint Foreign Chambers (JFC) took the cudgels for the Clark investors in a letter addressed to Finance Secretary Margarito B. Teves.

JFC represents seven foreign chambers including American, Australian-New Zealand, Canadian, European, Japanese, Korean, and the Philippine Association of Multinational Companies Regional Headquarters Inc.

โ€œWe would like to propose to the Department of Finance to simply delete the said Section 12 from the Department Order, for both existing and future enterprises in the Clark area, or amend the Order to treat enterprises in the Clark area with the same incentive system that PEZA grants,โ€ the JFC letter said.

The JFC, which had earlier discussion with the DoF on the issue, said in the letter that Section 12 of the Department Order No.3-08 issued on February 2008 as Implementing Rules and Regulations for RA 9400 known as The Bases Conversion and Development Act restricts Clark investors from availing all the incentives made available to other investors. Section 12 provides for โ€œExclusivity of Incentives” where the order prescribes “No double enjoyment of the same or similar Incentives”.

This means that in case an existing enterprise in the CSEZA or the CFZ is going to expand its operations, the enterprise cannot enjoy ITH due to the referred Department Order. Currently, at Clark, sequential incentives combining an Income Tax Holiday (ITH) under EO 226 and a 5% Gross Income Tax under RA 9400 is a common practice. In order to do this, firms change their registration from the BoI to the CSEZA or the CFZ after the elapse of the ITH period.

Therefore, once they obtain the status of a CSEZA or a CFZ enterprise, they cannot benefit from the ITH even for new expansion projects unless the project is realized under a separate or different enterprise name, which is impractical.

Similarly, a new investor may face the same impediment not to avail of the said sequential incentives.

JFC also noted that a PEZA Industrial Park adjacent to the existing CSEZ and CFZ is being developed. The resulting mixture of three zones with different rules will cause incentive disparity among enterprises in the same area, and CSEZ and CFZ would be less attractive to potential investors, the letter said.

โ€œSince foreign investors believe investments should be for the long term, they plan to expand their operations. But if the referred Department Order impedes granting an ITH, potential investors may regard CSEZ and CFZ as unacceptable for future investments,โ€ the JFC said. JFC said that because RA 9400 does not prescribe “no double enjoyment of the same or similar incentives,” Section 12 in the Department Order may go beyond RA 9400.

JFC added that the amendment of the Department Order is under the full authority of DoF.

โ€œThe JFC encourages both existing and new investors to invest in the Philippines, and more so under the current global financial crisis. Therefore, we request you to look into our proposal and take a favorable decision to encourage additional investment,โ€ the letter added.

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