Ecozone firms seek incentives status quo

Published July 18, 2019, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

As the new Congress opens next week, economic zone industry groups, which employ 7.7 million direct and indirect workers, banded together to ask the new set of legislators to look for alternative fiscal strategies as they painted grim picture the current TRABAHO Bill may bring on jobs, foreign direct investments, and attractiveness of ease of doing business in the country.

The groups were represented by the Philippine Ecozones Association (PHILEA), Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI), IT and Business Process Association of the Philippines (IBPAP), Japanese Chamber of Commerce and Industry, Korean Chamber of Commerce and Industry, European Chamber of Commerce of the Philippines (ECCP) and Confederation of Wearable Exporters of the Philippines (CONWEP).

“We stand ready to engage policymakers in constructive dialogue that will result in a brighter future for our country,” the groups added.

“As the 18th Congress is set to convene, we look forward to working with lawmakers and the executive to enact legislation that will allow the country to employ more workers, attract more investments, and increase the government’s tax revenues.”

The groups also reiterated that they are not against TRABAHO Bill saying they understand the desire of the government to raise revenues and strengthen our fiscal position and we believe there are ways of achieving this goal that do not jeopardize the jobs, investments and tax revenues that the country already has.

PHILEA President Chito Zaldarriaga, who presented the groups’ sentiment, said: “Everybody in this table and beyond is on the same side with the government but there are certain considerations that we’re sensitive and open to dialogue with legislators and the bodies that will eventually make this decision.”

At the very least, Zaldarriaga said they are hoping for a status quo of the current incentives being offered by the Philippine Economic Zone Authority.

“We’re supportive but the problem is government must also consider existing locators in the Philippine Economic Zone Authority and in other investment promotion agencies because there is contract, but we feel this kind of TRABAHO Bill just change the rule in the middle of the game so many Koreans are holding investments and are on a wait and see mode,” said Korean Chamber of Commerce of the Philippines President Lee Ho Ik.

SEIPI President Danilo Lachica has proposed for increase in gross income tax to 7 percent from 5 percent after the income tax holiday. He also proposed for incentives for research and development.

Other members are amenable to increasing the GIE but they differ as to the rates. They also pushed for faster reduction of the 30 percent corporate income tax to 20 percent saying the current provision in the TRABAHO Bill is too small and too slow.

But they are one in saying that the current TRABAHO Bill to remove or even dilute tax incentives granted to locators now would risk the loss over time of millions of jobs and investments that would otherwise have been committed to the Philippines.

These industry groups represent economic zone developers and locators, along with their employees and workers. These groups also employ an estimated 7. 7 million jobs accounting for more than 10 percent of the labor force.

While these firms will be covered by lower corporate income tax (CIT) of 20 percent from 30 percent, timing limitations will be imposed on other incentives that they currently enjoy, such as tax investment allowances; higher deductions for research and development, training and labor; customs duty exemptions; and export subsidies.

These ecozone industry groups also generate over $54 billion worth of exports, enabling them to remit substantial taxes to the national and local governments.

“One in ten jobs available to the entire labor force comes from an ecozone,” the groups said.
The groups even pointed out that the Philippine tax incentive policies have also been successful such that regional rivals for investment like Vietnam and Thailand have aggressively implemented the similar policies.

Instead of pushing the TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities Bill), also known as the TRAIN 2, they urge lawmakers to take alternative measures to sustain the country’s present momentum of economic growth, especially after surviving jitters from the recent midterm national elections.

TRABAHO Bill is the second package of the government’s comprehensive tax reform program. It is also known as TRAIN 2 because it comes after the first package known as the TRAIN Law.