Firms choose PH because of tax perks – AmCham

Manufacturing and services export industries have projected of massive job losses higher than the pre-COVID estimates of 1.4 million should government insist on changing the current incentives system available to investors.

This was stressed by a coalition of manufacturing and service export industry groups (electronics, garments, IT-BPM, ROHQ) as Senate is winding up with their discussions on the long delayed Corporate Recovery and Tax Incentives for Enterprises (CREATE) Bill, which seeks to overhaul tax current incentives regime.   

“The biggest danger here is the number of jobs lost and the last time is 1.4 million jobs at stake,” stressed Francisco Zaldarriaga, president of the Philippine Ecozones Association (PHILEA). Zaldarriaga noted that the estimated 1.4 million jobs lost was estimated pre-COVID yet under the TRABAHO and CITIRA, the predecessor bills of CREATE.

The estimated 1.4 million job lost was a collective figure during that time. “Obviously, that number has already changed,” he said citing the current global pandemic.

 “We are sensing the reduction of workforce that is already happening. So, it does not make sense to remove this one ingredient that keep these companies here.”

As developers of economic zones and industrial estates, PHILEA is worried they get stuck with land inventories for a long time just like what happened to their billion-dollar investments when the Asan financial crisis.

“Because of the Damocles sword, companies are starting to consider going out of the Philippines,” he said.

Philea lauded the proposed corporate income tax (CIT) reduction, but warned that “tampering with the current incentives is very very dangerous.”

 John Forbes, vice-chairman of the legislative committee of the American Chamber of Commerce of the Philippines, pointed out that the main reason American firms invest in the Philippines is the attractive incentive package being offered by Philippine Economic Zone Authority to exporters.

 Aside from that, he said, the US is the destination market for most of the IT-business process, garments and electronics industries.

The attractive tax regime offered by PEZA has offset the high cost of logistics (25% higher) and power (30% higher), he said.

Dan Lachica, president of the Semiconductor and Electronics Industries in the Philippines Foundation Inc. said the Philippine labor cost is actually 30 percent higher compared to neighboring countries in ASEAN.

Despite the high cost of doing business, Forbes said, “US companies come to the Philippines not to Vietnam? It is because the fiscal incentives level the playing field.”

Aside from the real job losses, Lachica noted of missed opportunities stressing that 15 percent of volumes of electronics firms operating in the country have already been transferred elsewhere during this pandemic.  

 The high paying jobs at regional operations and headquarters in the country have already been affected by the implementation of the TRAIN 1.  

The Philippine Association of Multinational Companies Regional Headquarters also appeal for fairness for existing locators.” ROHQs used to flock to the Philippines but no longer since the TRAIN 1 implementation.

 While the coalition of industries appeared to be amenable to the option 2 being proposed by Sen. Ralph Recto to ensure continuity of incentives to existing investors, the groups would rather stick to their position against any move to overhaul the current incentives regime.