MANILA -- The Philippine Economic Zone Authority said Monday it would submit to lawmakers and cabinet agencies this week its inputs to the second trance of tax reforms, as it sought to keep foreign investors in the country.
The PEZA, in charge of the country's economic zones, will propose a higher tax rate on gross income earned to 7 percent from 5 percent and a longer income tax holiday, said Director General Charito Plaza.
Citing the strategy of China and Vietnam, Plaza said the Philippines should consider offering subsidies to lure "big ticket" firms. China, she said, offers rent-free land for up to 20 years.
"We have to be very, very careful in passing the CITIRA bill because it has a lot of implications," Plaza told ANC's Early Edition.
The CITIRA or Corporate Income Tax and Incentives Rationalization Act seeks to lower the corporate income tax rate and update incentives packages. It will follow the first tranche of reforms, which lowered personal income tax rates and raised duties on fuel, cars and sugar sweetened drinks.
"We also have to be careful because we might destroy the interest of investors, we might destroy our international image because primarily, our investors are saying: Why are you changing the rules in the middle of the game?" Plaza said.
Plaza said PEZA supported the second tranche of tax reforms "from the very beginning." She said the agency's inputs would be submitted to the Senate, the Department of Finance and the Department of Trade and Industry.
The Philippines has among the highest corporate income tax rates, the shortest income tax holidays and the highest power rates, that's why PEZA locators are counting on the current incentives regime, she said.
With "millions of hectares of idle land," the Philippines can "afford" to replicate China's offer to investors, she said.
Taipan Lucio Tan, she said, recently got an award in China for building Eton-branded properties there.