With expansion plans nixed on tax perks loss, semicons see flat growth

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SEMICONDUCTOR firms are staring at a flat export growth this year, as expansions intended to improve operations were scrapped largely due to the government’s move to rationalize incentives.

Semiconductor and Electronics Industries in the Philippines Foundation Inc. President Danilo C. Lachica said a number of investors have abandoned their plans to expand, as they can no longer wait for the final policy on tax incentives. With uncertainty in place, the leading export industry is expecting the worst this year.

“[Our] growth forecast [for this year] is between 0 percent [and] 3 percent,” Lachica told the BusinessMirror.

“Expansion investments are weak. No shutdown [has been] reported, but [we] lost over $1 billion [about P52.10 billion] in expansions initially planned in the Philippines,” he added.

According to Lachica, the dumped expansion projects would have directly employed 10,000 workers and benefitted 70,000 employees in related industries.

Uncertainty from ‘Trabaho’ bill

Lachica attributed the lost investments and the flat growth forecast to the uncertain future of incentives provided to firms in economic zones. Senators have yet to decide on the fate of the proposed Tax Reform for Attracting Better and High-Quality Opportunities bill, dubbed the Trabaho bill.

The Trabaho bill will gradually reduce corporate income tax to 20 percent in 2029 from 30 percent on one hand, and will rationalize incentives on the other.

The measure will lift incentives deemed crucial by investors for staying here, including the 5-percent tax on gross income in lieu of all local and national taxes. Semiconductor firms, which are mostly operating in economic zones, oppose this component of the Trabaho bill. Lawmakers ended their session last Friday to make way for the midterm polls in May.

However, senators can still pass the Trabaho bill when the 17th Congress resumes session for the last time on May 20. Sine die adjournment begins on June 8.

Electronic products and semiconductors make up more than half the pie of Philippine exports.

Semiconductor exports from January to November of last year grew 4.6 percent to $34.87 billion from $33.34 billion during the same period in 2017, according to figures from the Philippine Statistics Authority. It accounted for 55.56 percent of the country’s $62.76-billion exports total for the 11-month stretch.