FOUR Chinese investors fleeing the fallout from the trade war are eyeing to locate in the Philippines, but are holding off their plans with the looming rationalization of tax incentives, according to the Philippine Economic Zone Authority (Peza).
Peza Director General Charito B. Plaza said she has received four groups of Chinese businessmen planning to invest in the country. They are apparently fleeing their country now heavily suffering from high tariffs from the United States.
However, their plan to relocate to the Philippines is still in the pipeline, as they will first observe closely the developments regarding the impending overhaul of incentives. Under the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill, tax perks granted to economic zone firms will be rationalized, with some incentives set to be removed.
“This is due in part to the trade war between China and the US with soaring tariffs for products traded between these nations. The investors expressed, however, that because of the uncertainties of the Trabaho bill, they are still holding off their plans of transferring to the Philippines,” Plaza said.
She argued it could have been the perfect time to attract more American and Chinese firms to the Philippines, as it has trade privileges with the conflicting economies. Manila is a beneficiary of Washington’s Generalized System of Preferences (GSP), which eliminates duties on thousands of products.
Last year it was the sixth-largest beneficiary of the privilege, as it exported $1.5 billion of goods to the US.
“The Philippines is at a prime spot to take advantage of the ongoing US and China trade war. To maintain its position as an attractive investment destination, the retention and enhancement of the incentives given to exporters is inherent,” Plaza argued.
As a resolve, she reiterated the government should not tinker with the incentives currently granted to Peza-registered firms. She suggested that the Trabaho bill be separated into two packages: the first on the lowering of corporate income tax to benefit local firms, the second on the enhancement of incentives to attract more foreign investors.
“Peza’s position to separate the tax and incentives regime for exporters is for the Philippines to be on a par and stay competitive with other economic zones of countries similarly attracting industries, multinationals and exporters to invest in their country,” Plaza said.
“Domestic enterprises and small and medium manufacturing enterprises, likewise, need a separate and enhanced tax and incentives regime as the primary source of completing the supply chain, maximizing production and manufacturing capability and becoming initially as indirect exporters, suppliers of our exporters and even later…exporters themselves,” she added.
The Peza chief did not disclose the names of the investors, but revealed they are in the business of manufacturing, electronics and garments.
The Trabaho bill will gradually reduce CIT down to 20 percent in 2029, from 30 percent. On the other hand, it will remove a number of incentives that are deemed crucial by locators to maintain their operations here.