Economic zone reduces collection – BIR

By Mortz C. Ortigoza

 LINGAYEN -The leadership of the Bureau of Internal Revenue felt insecure about the taxes it will lose in case the Northern Luzon Summit organized recently by Pangasinan Governor Amado T. Espino bear fruits. The summit discussed the possibility of an economic zone in the province. A BIR official, based in Region 1 but who asked anonymity, opined that the presence of the economic zones in Pangasinan will diminish the tax collection of the agency because of the five percent flat rate given as incentives to foreign and local investors inside the zone.

“Pag sa loob ka ng export processing zone uniform ang tax five percent. Example , garments 5 %. Pag sa labas ka may income tax, merong VAT (valued added tax), percentage tax, etcetera pag sa loob ka mababa ang babayaran mo. Uniform five percent international (investor), five percent local investor. So maliit lang makukuha ng BIR,” the official said.
 She cited as example Mamasita, a business entity, in La Union that once operates its business outside the Special Economic Zone at Poro Point Free Port Zone in San Fernando City, La Union.
 The source said according to the law of the Board of Investment, a Filipino investor who operates a business inside the processing zone is required to export 70 percent of his finished goods while he can sell locally 30 percent of his product. She said the 30 percent of the goods sold at the local market is still taxed with five percent and not with the rates imposed by VAT and income taxes. “Excess of the product to the 30 percent allowed is subject to different Philippines taxes being charged to other business outside of the EPZA,” she said.
 She explained 100 per cent foreign owned businesses are allowed inside the zone. Philippine laws mandate that foreign ownership is up to 40 percent in a Philippine industry.
 According to the Omnibus Investment Code of 1987 a registered enterprise (in the economic zone) which exports 100% of its total production need not comply with this (constitutional) requirement.