IF the government wants to continue increasing its foreign direct investments (FDI), removing tax incentives under the Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho) bill will not help achieve this goal, the European Chamber of Commerce of the Philippines (ECCP) said.
In a briefing with reporters on Wednesday, ECCP Executive Director Florian Gottein said incentives remain an important consideration for investments. This, he said, has made Singapore and Malaysia attractive investment destinations for the European Chamber.
Gottein said removing tax incentives can only be considered if a country has sufficient infrastructure that allows businesses to thrive. This, he said, is not the case in the Philippines.
“Normally you give incentives when there is not enough infrastructure; maybe there’s high energy prices, there is more expensive telecommunication sector, the Internet so that’s why you give incentives—to attract companies to invest in the Philippines,” Gottein said. “Why are we cutting down incentives in the Philippines when we have not reached [a high] level of infrastructure?”
Gottein said the government does not need to come up with new taxes to raise revenues for infrastructure programs such as the “Build, Build, Build” (BBB). He said the government can just improve tax administration.
He added that the government must also find ways to better communicate its plans regarding incentives. He said this contributes to the uncertainties for businesses that prevent them from making the decision to increase or make new investments.
CIT cut backed
However, ECCP President Nabil Francis said the chamber supports the reduction of corporate income tax (CIT) under the Trabaho bill. He said this will make the country more competitive compared to its neighbors.
Nonetheless, Francis said they would recommend that the reduction of the CIT to 20 percent from 30 percent be done “as soon as possible.” He said reducing the CIT to 20 percent will make the Philippines competitive in the region, saying that CIT in other countries like Singapore is actually lower at 17 percent.
“We are at 30 percent. We want it to go down as quickly as possible,” Francis said. “The direction is the right one. We are supporting any kind of liberalization of the economy, making it attractive to foreign investors.”
Plans on hold
Gottein said the ECCP conducted a survey among its members, which showed that many are putting their investments on hold while others are relocating their investments due to uncertainties created by the proposed Trabaho bill.
He said some companies have relocated their investments to Vietnam and China, which was a natural reaction given the reality of the competition among businesses.
The ECCP executive director said that firms which put their plans on hold may decide their course of action in the middle of 2019.
Apart from the Trabaho bill, the ECCP’s advocacy priorities include the amendments to the Public Services Act and Retail Trade Liberalization Act of 2000. It will also be supporting the Philippine Contractor’s Accreditation Board Licensing for fully-owned contractors.
The ECCP said its conferences and exhibitions will include those on safer mobility; smart or future cities; natural resources; and agriculture.
Image credits: nonoy Lacza