MANILA - (UPDATE) Electronics and garments exporters have joined the call of other industry groups for government to retain their tax incentives as a bill seeking to limit tax perks advanced in the House of Representatives.
Lawmakers on Monday passed the Corporate Income Tax and Incentives Rationalization Act (CITIRA).
The bill aims to bring down corporate income tax rates to 20 percent from the current 30 percent, and make up for the lost revenues by removing the 5 percent tax on gross income earned. It also seeks to limit the effectivity of incentives to a maximum of 5 years.
The Semiconductor and Electronics Industries in the Philippines Foundation (SEIPI) and the Confederation of Wearable Exporters of the Philippines (CONWEP) warned that the loss of these incentives will weigh on their ability to compete globally.
"There is this buyer that is asking for one of our members to migrate their production to another country outside of the Philippines for a mere 1 percent difference. That's how competitive it is," said CONWEP associate director Rosette Carillo.
SEIPI president Dan Lachica, meanwhile, said that while they support the government's push to cut corporate income taxes, incentives given by the Philippine Economic Zone Authority (PEZA) should be exempt from the measure.
The American Chamber of Commerce in the Philippines (AmCham) also said some foreign businesses may shut down if CITIRA is passed.
"I'm worried, we're worried, and AmCham and the JFC (Joint Foreign Chambers) about CITIRA, because our members, when they were surveyed on TRAIN 2, reported they would reduce their employment and they would cease expansion, and perhaps leave," said AmCham senior advisor John Forbes.
A business process outsourcing industry group also said earlier that cutting incentives would slash their growth in half.
PEZA, the Philippines' main investment promotion body, meanwhile said it is "ready for war" in its bid to maintain the tax incentives.
“They are reducing everything. Our incentives are the only thing na nakaka-attract ng (that attracts) investors,” said PEZA Director General Charito Plaza.
Plaza, meanwhile, downplayed concerns that President Rodrigo Duterte was referring to her when he said he would fire a member of the government's economic team.
"May isa pa akong tanggalin (I'll remove another) though she is not corrupt, but she is not in parity with the other's performance. Handling an economic office. I have to change her," Duterte said on Tuesday.
Plaza said she did not feel "alluded to" by Duterte's statement.
The PEZA chief has been at odds with other members of the economic team, particularly, Trade Secretary Ramon Lopez, over her insistence that PEZA's incentives be exempt from CITIRA.
Plaza has accused Lopez, who chairs the PEZA Board, of not defending the agency's programs by agreeing to CITIRA'S provisions on incentives.
Lopez, meanwhile, said he is standing by the tax reform measure.
"The policy direction is very clear. We are for time-bound performance-based incentives. Maybe she doesn't understand that those principles are very rational economic principle[s] that government policy makers must adhere to," Lopez said.
- With a report from RG Cruz, ABS-CBN News