LAWMAKERS approved last Tuesday a bill designating the motor vehicle (MV) and MV-component manufacturing industry as a priority sector and including it in the country’s “strategic investment priority plan,” or SIPP.
The Sipp is the list of sectors that are qualified for tax perks under Republic Act (RA) 11534, or the Corporate Recovery and Tax Incentives for Enterprises (Create) law.
House Committee on Ways and Means Chairman Joey Sarte Salceda said the bill’s designation would make the MV industry included in the Sipp, as outlined in the amended tax provision of an unnumbered substitute bill.
Under the amended tax provision of that proposed law, the MV industry and components manufacturing are declared a priority investment sector that will form part of the country’s SIPP in the next 12 years.
Under this legislation, registered business enterprises within that industry would be entitled to fiscal incentives as per Title XIII of the National Internal Revenue Code (NIRC), subject to certain conditions.
Inconsistency
OPPOSITION to the lawmakers’ proposal has surfaced from the Department of Finance (DOF), the Bureau of Internal Revenue (BIR) and the National Tax Research Center (NTRC).
Officials from the BIR and DOF have expressed disagreement with the automatic inclusion of the motor vehicle industry in the Sipp. They argue that a specific evaluation process should be followed for any sector or industry to be considered for inclusion in the plan.
An NTRC official emphasized that the proposal is inconsistent with the Revenue Code, as amended by the Create law. Fiscal Incentive Branch Chief Tax Specialist Roselyn C. Domo said RA 11534 mandates a thorough evaluation process to determine the suitability and potential of any industry or sector included in the Sipp.
“It (law) provides further that no case shall sector or industry be included in Sipp unless it is supported by formal evaluation process or report,” Domo said. “Thus, any recommendation to have the Philippine MV manufacturing industry in the Sipp to be eligible for Sipp must be accompanied by the said evaluation process or report.”
She added that interested parties must apply for Sipp registration through the Investment Promotion Agencies (IPAs). The applications will be assessed by the Fiscal Incentives Review Board (FIRB) before being included in the list of industries under Sipp, provided they meet the qualifications.
Under the Create law, Sipp eligibility is valid for three years, subject to regular reviews and amendments.
Ample time
ROMULO V. Manlapig, program director for the Comprehensive Automotive Resurgence Strategy (CARS) program at the Department of Trade and Industry (DTI), assured there is ample time to address the issues raised by the opposition.
Manlapig added that the incentive provisions under the CARS program are distinct from those outlined in RA 11534. The CARS program offers both fiscal incentives and non-fiscal incentives to car manufacturers who fulfill the stipulated criteria outlined by the policy.
For his part, Chamber of Automotive Manufacturers of the Philippines Inc. President Rommel R. Gutierrez expressed full support for the bill’s passage.
Gutierrez, first vice president of Corporate Affairs Group of Toyota Motors Philippines Inc., highlighted the challenges faced by manufacturers in the country and stressed the importance of government support to keep the local industry competitive.
He said that continued support is vital for sustaining manufacturing and ensuring the survival of part suppliers in the Philippines.
“We fully support the passage of the bill. The primary reason for manufacturers who remain in the Philippines, such as Toyota, Mitsubishi, and Isuzu, revolves around the level of government support,” Gutierrez said.
“Importing vehicles is considerably more expensive than local production, and we face challenges persuading our overseas principals to localize vehicle production here. Our competition extends not only to other brands but also to those within the region.”
Gutierrez also emphasized Toyota’s continuous production of two of its models in the country.
“It’s noteworthy that other assemblers like Ford, Nissan, and Honda have departed due to the increasing lack of competitiveness in manufacturing in the Philippines,” he said. “This reinforces our strong advocacy for local industry support, aiming to sustain manufacturing and the associated network of part suppliers.”
Small market
CAGAYAN de Oro Rep. Rufus B. Rodriguez, the principal author of the unnumbered bill, said emerging economies like Brazil, Russia, India, and China also prioritize the development of a domestic vehicle manufacturing industry.
Rodriguez believes member states in the Asean region with manufacturing capabilities—the Philippines, Thailand, Malaysia and Indonesia—to continuously implement programs and policies for MV manufacturing as a core strategy for industrialization.
“Automotive-skills development programs have elevated Filipino workmanship and capabilities. Despite these achievements, challenges persist as the Philippines struggles to develop the competitive capacities of its [MV] manufacturing industry. The small domestic market base hampers economic scale in manufacturing operations,” he said.
According to Rodriguez, policy inconsistencies and a weak regulatory framework have further impacted the market for new vehicles and, consequently, the parts manufacturing industry. As a result, he said investments are limited, and the parts manufacturing and auto supporting industries remain underdeveloped.
The lawmaker said majority of parts manufacturers are categorized as small-scale and medium-sized enterprises with limited market access opportunities. Rodriguez added that about 90 percent of total export revenues from vehicle parts and components are generated by multinational companies, which represent less than 10 percent of local parts manufacturers.
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