DTI eyes separate incentives scheme for locators in domestic ecozones

October 18, 2016 at 12:00

The Department of Trade and Industry (DTI) said it is still open to the idea of setting up ecozones for domestic-oriented companies, but it could insist on providing a different incentives package for locators in these ecozones.

Trade Secretary Ramon M. Lopez said no proposal has yet been crafted for an incentives package for locators in these proposed domestic ecozones (DEZs), but there could be a “differentiated approach” in luring in investors via fiscal or non-fiscal perks.

“The incentives could be different, but they’d still receive benefits , because of the facilitation measures given to set up their businesses inside ecozones. That’s an incentive in itself,” Lopez said, referring to locators that would cater to the domestic market.

Lopez acknowledged that creation of DEZs is within the mandate of the Philippine Economic Zone Authority (Peza), but the policy direction in enabling these is still under discussion.

Business chambers in thecountry have initiated the call for domestic ecozones as far back as two  years ago to cut through the red tape in local government units and to spur manufacturing.

Early this year, DTI Assistant Secretary for Trade Policy and Industry Development Rafaelita  Aldaba said creating these DEZs play a key role in keeping local industries competitive amid the elimination of tariffs in international trade. Aldaba noted that the “ideal” setup would grant the same incentives to DEZs as those  enjoyed by export-oriented locators in the Peza.

She also said the limitation on setting up these ecozones in the “poorest provinces” should be removed and that a framework in identifying where specific industries could thrive should be developed.

Currently, Peza ecozone locators can only sell up to 30 percent of their output in the domestic market. Beyond that, ecozone locators will have to pay taxes and duties at regular rates.

Also, the 5-percent tax rate on gross income (GIE) that kicks in after the expiry of the income-* tax holiday can only be availed by export-oriented enterprises. Zone locators, which serve the domestic market, pay the regular rate of 30 percent on net income.

The Peza, in the previous administration, pushed to have the 5-percent GIE enjoyed even by firms that produces majority of their output for the domestic market.

However, the DTI highlighted the possible problems in setting up these zones, such as the further reduction in government revenues, the management of these new types of zones and the complex regulatory framework at the local level.

The proposal had failed to gained traction because of these hurdle.

Source: www.businessmirror.com.ph