The Philippines and Japan have reaffirmed their commitment to further build on their strong economic partnership, which includes plans to expand Japanese investments in the country following favorable developments on a tax reform measure.
Newly designated Japan Ambassador to the Philippines Koshikawa Kazuhiko said during a recent courtesy call on Finance Secretary Carlos G. Dominguez III that Japanese companies are exploring ways of realigning their supply chains to other countries like the Philippines.
Koshikawa said the approval by the Senate of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, earlier passed by the House of Representatives, was welcomed by Japanese investors doing business in the country.
Koshikawa said CREATE will soon end the unpredictability on the future tax and incentives scheme of the country as well as significantly lower the corporate income tax (CIT) rate.
The Senate measure aims to lower the CIT for micro, small, and medium enterprises (MSMEs) with a net taxable income of P5 million and below to 20 percent, while other companies, including foreign firms, will pay a harmonized rate of 25 percent.
The current CIT, which is the region's highest, is 30 percent.
Koshikawa congratulated Dominguez on the Senate passage of the CREATE bill and expressed the hope that Congress would give its final nod to the measure so that President Duterte could soon sign it into law.
When the Congress resumes session next year after its yearend break, a bicameral conference committee composed of representatives from both chambers will hammer out a consolidated version of the CREATE bill for submission to the President for his approval.
Dominguez informed the Ambassador that aside from the CIT rate cut, CREATE will also allow the government to tailor fit incentives given to businesses so as to attract the kind of investors that it wants to invest in the Philippines.
Dominguez told Koshikawa the Philippines’ competitive edge in attracting foreign direct investments (FDIs) is its young working population, which complements Japan’s highly skilled labor force and makes the two countries ideal “demographic partners.”
During the meeting, Koshikawa also commended the Philippine economic team led by Dominguez for its sound fiscal management of the economy amid the COVID-19 pandemic.
He also restated Japan’s continuing support for the Philippine government’s efforts to curb the spread of the virus and recover from the economic repercussions of the crisis.
Citing the signing in September between the two countries of the 50-billion yen Post-Disaster Standby Loan (PDSL) Phase 2, the Ambassador reaffirmed Japan’s commitment to continue assisting the Philippines in its disaster risk reduction and mitigation programs.
In response, Dominguez said the Philippines has looked to Japan as a good example of how to curb the spread of COVID-19.
He again thanked Japan for responding swiftly to the government’s call for emergency financing to help mitigate the impact of the pandemic on the economy and the Filipino people.
Dominguez also thanked Japan for its support to the Philippines’ development agenda, citing its status as the country’s leading official development assistance (ODA) partner, with loans and grants amounting to around $10.10 billion (38.53 percent of total ODA) as of June 2020.
Since the start of the Duterte administration in July 2016, 15 loan agreements totaling JPY679.296 billion (about P313.147 billion or $6.443 billion) have been signed by Manila with Tokyo.