MANUFACTURERS in the Subic Bay Freeport Zone may be forced to lay off at least 30,000 workers to survive the rationalization of tax incentives under the current version of the Trabaho bill.
House Bill 8083, or the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho bill), could be brutal for the Subic work force. The measure that seeks to slash corporate income tax (CIT) on one hand and overhaul incentives on the other will compel locators in the free-port area to reduce its manpower.
Danny J. Piano, president of the Subic Bay Freeport Chamber of Commerce (SBFCC), told the BusinessMirror this could be the consequence if the government insists on passing the current version of the Trabaho bill. Estimates by the SBFCC put job losses at 30,000 to as many as 40,000.
The estimated job losses account for 22.5 percent to 30 percent of the nearly 133,000 workers, the majority of which are locals, employed in the economic zone. Wilma T. Eisma, chairman and administrator of the Subic Bay Metropolitan Authority (SBMA), said the free port area employs 132,916 workers as of May.
Eisma argued there will really be massive layoffs in Subic if the Trabaho bill, as passed by the House of Representatives, will be enacted into law. Piano couldn’t agree more.
“This [layoffs] won’t be happening all at the same time since companies have different transition periods depending on how long they are already getting their current incentives, and only if the House-approved bill will be the final one,” Piano said.
He explained locators are considering moving out of the country if the 5-percent gross income earned (GIE) granted to them is removed, as proposed under the Trabaho bill. Locators pay this in lieu of local and national taxes.
“Nobody has intimated yet that they will definitely move out. What they are saying is that they will consider moving out depending on the final bill,” Piano said.
“However, the currently approved House Bill 8083, which will raise their [locators 10 years or more here] taxes from 5-percent GIE to 28-percent CIT by 2021, is unacceptable. What seemed to be an acceptable compromise is to extend the incentives by 10 years so that during the transition, they will already fall into the 20-percent CIT bracket,” he added.
Under the Trabaho bill, CIT will be reduced gradually down to 20 percent in 2029 from 30 percent. On the other hand, it will remove a number of incentives, including the 5-percent GIE, which locators deem crucial in their decision to stay here.
The SBMA, as the manager and administrator of the Subic free-port area, is trying to come up with a compromise that will satisfy the interests both of the government and the locators, Eisma said in an interview with the BusinessMirror.
“The sad reality is if Trabaho bill gets passed as worded right now, there will really be looming loss of jobs. We just recently conducted a survey on some of our locators and they said that is what is going to happen,” Eisma explained in a mix of English and Filipino.
From this survey, the SBMA estimated 22,000 workers are at risk of losing their employment. However, she admitted the numbers could be higher, as firms that will be most affected are manufacturers that directly and indirectly employs thousands.
“I believe there can be a middle ground where the target of the Department of Finance can be met, and, at the same time, our targets could also be met. I’m trying to work on that,” Eisma explained.
“My agenda is to be able to maintain the sustainability and the competitiveness of Subic not just vis-à-vis the other zones, but more like the country, because we are competing with Cambodia, with Thailand. That competitiveness to me is very important to retain,” she added.
On the other hand, Piano said the Trabaho bill could attract more investors due to lower CIT, but it could also work against the government’s objective of creating jobs outside of Metro Manila, as investments in regional economic zones are seen to decrease with the removal of incentives.
“Companies locating outside of economic zones and free port [areas] will probably increase because of the lower CIT. Companies already inside will decrease because of the higher tax compared to what they are paying right now,” the SBFCC chief said.
Lawmakers from the House passed the Trabaho bill on third and final reading in September. The measure, which is the second package of the Duterte administration’s tax-reform program, is now being scrutinized by senators.