Investments may be 'diverted' due to tax reform concerns: exporters' group

Warren De Guzman, ABS-CBN News

Posted at Sep 12 2018 08:19 PM | Updated as of Sep 13 2018 07:20 AM

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MANILA - Over US$1 billion investments for expansion ventures in the Philippine electronics industry have been "diverted" to other destinations as manufacturers became wary of the second package of tax reforms being pushed by the administration of President Rodrigo Duterte, an industry group said Wednesday. 

The Tax Reform for Attracting Better and High Quality Opportunities or TRABAHO bill, which used to be called TRAIN 2, seeks to rationalize fiscal incentives and lower the corporate income tax rate. 

But many foreign investors have said the proposed removal of tax incentives under TRABAHO would put them at a disadvantage. 

"We estimate over $1 billion in expansion plans have been diverted," said Dan Lachica, president of the Semiconductors and Electronics Industries in the Philippines (SEIPI). 

"That’s a lot of jobs. Nobody is shutting down, but without expansions here because of uncertainties, we will be left with legacy products which will soon be obsolete," Lachica said.

Japanese and European business groups earlier called on the government to keep the tax incentives for businesses registered with investment promotion agencies like the Philippine Economic Zone Authority (PEZA). 

On Wednesday, the Joint Foreign Chambers of the Philippines (JFC), which counts American, Australian-New Zealand, Canadian and Korean business groups, also called on the government to keep the tax perks for certain businesses. 
 
"Leave PEZA alone," said Ebb Hinchliffe, executive director of the American Chamber of Commerce in the Philippines. 

Both SEIPI and the JFC clarified that they support the aims of TRABAHO bill to lower the corporate income tax rate and create new incentives for firms creating new technologies and generating jobs. 

Lachica, however, said they hope the government will listen to their proposed changes to the tax reforms to keep Philippine semiconductor manufacturers competitive. 

He said the TRABAHO bill does not carry the provisions SEIPI proposed during public hearings. 

Support from Philippine businesses

The Philippine Chamber of Commerce and Industry (PCCI), meanwhile, said it supports the TRABAHO bill as its goal of lowering corporate income taxes from 30 to 20 percent will be good for micro, small and medium enterprises. 

"For the incentives, I think it is about time we really put it time-bound. Right now, it is forever," said PCCI president Alegria Sibal-Limjoco.

Limjoco pointed out that foreign direct investments have been growing despite what other business groups have been saying about the TRABAHO bill. 

“There are many industries that do not really need incentives and there are others who need. It must be calibrated, it cannot be a one size fits all,” said Filipino-Chinese businessman George Siy. 

The House of Representatives passed the TRABAHO bill on third and final reading on Monday. The bill now has to go through the Senate. 

Some senators, however, have said that given the controversy over the first package of tax reforms passed last year, TRABAHO will not be an easy bill to pass. 

"A lot of my fellow senators are quite apprehensive. We still have to study it," said Senator Grace Poe.

She said that it may not be "the right time for another TRAIN," referring to the Tax Reform for Acceleration and Inclusion law, which cut income taxes but raised duties on commodities such as fuel and sugar-sweetened beverages. 

Senator Sherwin Gatchalian said discussions on the TRABAHO bill may drag on until the last Senate session of the year, just like what happened to TRAIN.