FIRB finds PEZA clueless on actual investments made by locators who enjoy tax incentives

The Philippine Economic Zone Authority (PEZA) does not track 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 these are commensurate to the value of fiscal incentives that such ecozone locators enjoy each year, according to the Secretariat of the Fiscal Incentives Review Board (FIRB).

The Secretariat said in its report to Finance Secretary and FIRB Chairman Carlos Dominguez III that the PEZA submitted incomplete information about the investment capital and market orientation of its locators when it was asked to send data to the FIRB as part of the compliance of investment promotion agencies (IPAs) with the provisions of the CREATE Law.

“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 said in her report during a recent Department of Finance (DOF)  Executive Committee (Execom) meeting.

Danofrata said that 12 of the 196 PEZA-registered business enterprises (RBEs) did not contain information on their investment capital, while 11 did not specify their market orientation.

As of April 30 or almost 10 months after the implementing rules and regulations (IRR) of CREATE was signed, only four out of 14 IPAs were able to substantially comply with the reportorial requirements of the FIRB as mandated under CREATE.

The four IPAs are the Bases Conversion and Development Authority (BCDA), John Hay Management Corp. (JHMC), Poro Point Management Corp. (PPMC), and PHIVIDEC Industrial Authority (PIA).

“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 said.

She said these reports from IPAs are also shared with other government agencies, especially the Bureau of Internal Revenue (BIR), for monitoring, audit, and other purposes consistent with the target outcomes of CREATE.

Danofrata said the FIRB Secretariat already sent follow-up letters to the IPAs that have incomplete and missing submissions.

Based on what the FIRB Secretariat has gathered so far, the Board of Investments (BOI) tallied the highest amount of investment capital totaling P43.12 billion with 136 RBEs. Of these 136 RBEs, 9 are export-oriented firms and 127 are domestic-oriented businesses, Danofrata said.

Danofrata said the IPAs including PEZA were able to register a total of 348 firms as of April 30, of which 100 are export-oriented and 237 are domestic-oriented enterprises.

“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,” Danofrata said.

Real estate activities accounted for 129 RBEs, followed by the services sector with 73,  and manufacturing with 68.

The country’s other IPAs are the Authority of the Freeport Area of Bataan (AFAB), Aurora Economic Zone and Freeport Authority (APECO), Cagayan Economic Zone Authority (CEZA), Clark Development Corporation (CDC), Regional Board of Investments-Bangsamoro Autonomous Region in Muslim Mindanao (RBOI-BARMM), Subic Bay Metropolitan Authority (SBMA), Tourism Infrastructure and Enterprise Zone Authority (TIEZA), and Zamboanga City Special Economic Zone Authority (ZCSEZA).