THE Philippines will not lose any of its existing investors on the government’s move to review business contracts, but it will scare off some prospective firms that intend to set up shop here, an envoy has warned.
Swiss Ambassador to the Philippines Alain Gaschen said Swiss firms operating here intend to stay in spite of President Duterte’s string of actions against some of the country’s corporations. Swiss firms, he described, find the business environment in the Philippines “stable” and would likely retain their shops here for the long term.
“Some of our investors have been here in the Philippines for about 50 years, even 100 years, and it will stay that way as long as they find the business environment stable,” Gaschen said in an interview with the BusinessMirror.
However, he warned that the President’s move to review the contracts, particularly that of the state with water firms Manila Water and Maynilad, could discourage prospective investors from coming in. He cited in particular Duterte’s threat of a military takeover of the two firms, which he said will never sit well with any investor.
“However, prospective investors might be afraid to come in based on what they hear from the outside. It’s not good to hear of military takeover of a business, no one wants that. Those who are here will not be distracted by the President’s words, but those who are considering [to do business here], they might be discouraged,” Gaschen explained.
Gaschen also argued the government has to finalize the tax structure and rates to further magnet investors. As such, passing the Corporate Income Tax and Incentives Rationalization Act (Citira) bill will be crucial in defining the country’s investment environment this year.
“The Citira bill has good intentions, especially that it will lower the corporate income tax [CIT] rate, but it should be clear how existing investors will transition to the new tax regime. That has to be clear. Businesses do their accounting and plan their expansions in advance, and having a certain tax structure will help,” the envoy said.
The Citira bill is the government’s second tax reform package. It intends to trim the CIT rate to 20 percent by 2029, from 30 percent at present, and rationalize fiscal incentives granted to firms operating in economic zones.
It hurdled the House of Representatives last year, and senators are eyeing to pass the bill once they resume session starting on Monday.
However, the measure is facing opposition from locators doing business in economic zones. They warned that the removal of their existing incentives will compel them to relocate to another Southeast Asian country, resulting in over 700,000 job losses, according to estimates by the Joint Foreign Chambers of the Philippines.