Incoming foreign-led projects approved by the country’s seven investment promotion agencies (IPAs) slid 36.2 percent to P29.4 billion in the first quarter, the tail end of which was marked by a lockdown imposed in Luzon and other parts of the country to contain the COVID-19 spread.
The Philippine Statistics Authority’s (PSA) latest report on foreign investment approvals released on Thursday showed that the first-quarter total across the Authority of the Freeport Area of Bataan (Afab), Board of Investments (BOI), BOI-Bangsamoro Autonomous Region in Muslim Mindanao (BARMM), Cagayan Economic Zone Authority (Ceza), Clark Development Corp. (CDC), Philippine Economic Zone Authority (Peza) and Subic Bay Metropolitan Authority (SBMA), was the lowest quarterly figure since the P14.2 billion in the first quarter of 2018.
The IPAs’ end-March approvals declined from P45.9 billion a year ago.
PSA data showed that foreign investment pledges fell year-on-year in Afab, BOI, Peza and SBMA, while CDC and Ceza had higher commitments compared to last year. In the case of BOI-ARMM, it did not attract any project during both the first quarters of 2019 and 2020.
IPAs give away fiscal and nonfiscal incentives to investors, which the Duterte administration wants to rationalize under the proposed second tax reform package, or the Corporate Recovery and Tax Incentives for Enterprises Act (Create).
When these IPA approvals materialize, they will be counted as foreign direct investments.According to the PSA, the top sources of foreign investment commitments from January to March were the United Kingdom (P6.1 billion), the United States (P5.7 billion) and China (P4.9 billion).
Combined with domestic investors’ upcoming projects, total IPA approvals during the first quarter dropped 58.1 percent to P114.8 billion from P274.2 billion a year ago.
To regain investor confidence in the Philippines amid the COVID-19 crisis, the economic team is seeking the Senate’s approval of Create, which will slash the corporate income tax rate—currently 30 percent and the highest in the Association of Southeast Asian Nations—to 25 percent in July.
The other salient features of Create included a 1-percentage point yearly reduction in companies’ income tax rate between 2023 and 2027 until it reached 20 percent; keeping the 5-percent tax on gross income earned incentive up to nine years among registered firms currently enjoying it, and extending the sunset period to four to nine years instead of just two to seven years in the Corporate Income Tax and Incentives Reform Act; extending the net operating loss carryover for 2020 losses for a five-year period instead of only three years under the Tax Code; and giving the President, upon the recommendation of the Fiscal Incentives Review Board (FIRB), power to grant heftier tax and nontax perks for massive investments.
At present, the Department of Finance-chaired board granted tax subsidies only to state-run corporations, but Create will empower the FIRB to green-light investors’ tax perks and make it the oversight body for the 13 IPAs nationwide. Last year, investment commitments of foreign investors jumped to a record high P390.1 billion.
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