MANILA - The Philippine Economic Zone Authority (PEZA) has blamed the second tax reform bill for the P97-billion or 41-percent drop in investments last year, the Commission on Audit (COA) has said.
State auditors noted that PEZA “fell short in its performance” with regard to investments as well as exports.
Investments in 2017 reached P237.570 billion, and this dropped to P140.242 billion in 2018.
PEZA, which lowered its target for 2018 to just P132 billion, cited the anticipated negative effects of the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) Bill, which was supposed to be the second package of the Tax Reform for Acceleration and Inclusion or TRAIN law that President Rodrigo Duterte signed in 2017.
“On the immense decrease in investments, management commented that TRAIN 2 or the TRABAHO bill was the sole and only reason why PEZA’s investment took an immense beating in 2018. TRAIN 2 created the atmosphere of uncertainty for PEZA investors,” the COA report said.
A copy of the report was received by PEZA Director General Charito Plaza on June 27.
PEZA told state auditors before the final report was written that it was “all up against the bill” and had told lawmakers of its serious effects on investments, exports and employment.
Following warnings that investors may flee as tax incentives will be affected, the bill did not pass in the Senate before the 17th Congress adjourned last month.
PEZA told the audit team that it had pointed out to lawmakers that a serious attempt to change the incentive scheme scared away investors even if the bill was not yet enacted into law.
The audit report also noted that exports fell 3 percent from $51.349 billion in 2017 to $49.736 billion in 2018.
Despite the decrease in exports and investments, the audit report stressed that PEZA exceeded its target employment by generating an additional 88,256 jobs, from 1,417,832 jobs in 2017 to 1,506,088 in 2018.
“It is commendable that for calendar year 2018, PEZA increased its annual growth in total direct employment,” the COA report noted.
The audit team also noted other commendable accomplishments of PEZA, as reported by its public relations group, such as the approval of 55 ecozone developer projects with committed investments of P68.14 billion or 50 percent of total investments approved in 2018.
PEZA also remitted P677.513 million in dividends to the national government.
The audit team, however, told PEZA to ensure the timely submission of documents as its PR group only submitted documents for validation on April 15.
The full audit report on PEZA can be downloaded from the COA website.