TRABAHO Bill could lead to job losses, exporters fear


Posted at Jul 18 2019 10:26 PM

MANILA—Several business groups again called on government to retain fiscal incentives amid a bill expected to be refiled that seeks to reform the country's corporate tax system. 

The Tax Reform for Attracting Better and Higher Quality Opportunities (TRABAHO) bill seeks to encourage investments by lowering the corporate income tax rate from 30 percent to 20 percent, bringing it in line with other countries in the region. 

But the bill also seeks to "rationalize" fiscal incentives to make up for the revenue loss with the lower corporate tax rate. 

The business groups, many of which are exporters, said that, while they support bringing down the corporate income tax rate, removing fiscal incentives could drive investors away. 

“We are as enthusiastic as government to raise more funds, and the way to do that is to increase investments. And to our point of view there are other ways, many ways,” said Francisco Zaldarriaga, president of the Philippine Ecozones Association (PHILEA).

Lawmakers shied away from discussing the TRABAHO Bill in the 17th Congress after the bill's predecessor, the Tax Reform for Acceleration and Inclusion law, was blamed for causing inflation to speed up last year. 

Zaldarriaga said the Philippines' neighbors, particularly Vietnam, are more aggressive in incentivizing investors and locators.

Besides PHILEA, other groups that oppose the removal of incentives are the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI), IT and Business Process Association of the Philippines (IBPAP), the Confederation of Wearable Exporters of the Philippines (CONWEP), and various foreign chambers of commerce. 

Rey Untal, president and CEO of IBPAP, said the sector's projected growth will be cut by “35 to 40 percent less growth” if the fiscal incentives are removed. 

Nobuo Fujii, vice president of the Japanese Chamber of Commerce and Industry of the Philippines, said investors are particularly looking at Vietnam for their next plant expansion. 

“They already knew this TRABAHO TRAIN 2. It’s a very dangerous situation in the Philippines, they think like that,” Fujii said. 

The CONWEP, meanwhile, said it expects 57,600 job displacements in its sector. 

The Department of Finance (DOF) has said that the TRABAHO Bill seeks to make incentives time-bound and performance-based as incentives that have no time limits cost the government P300 billion in foregone revenue annually. 

Representatives of the business groups said that if these incentives are not high to begin with, investors would not have chosen to do business in the Philippines. 

The DOF has sought to allay the worries of exporters and said that investors would get "superior incentives" with TRABAHO Bill.