SEMICONDUCTOR exporters have appealed to the Department of Finance (DOF) to lower its proposed corporate income-tax (CIT) rate to 10 percent, from 15 percent, under the second package of the government’s Comprehensive Tax Reform Program (CTRP).
The Semiconductor and Electronics Industries in the Philippines Foundation Inc. (Seipi) said this tax rate will ensure that electronics exporters would keep their work force of about
3.2 million.
In a news briefing on Wednesday, Seipi officials said they have already discussed with the DOF the group’s suggestions on the second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2).
Seipi President Danilo C. Lachica said they proposed a 10-percent CIT, inclusive of local business taxes and real-estate tax.
“We have asked [Finance Secretary Carlos G. Dominguez III] to lower the [corporate income tax] rate for us to 10 percent, instead of 15 percent,” Lachica said. The logic behind this, he added, is to maintain the competitiveness of the industry, as it is country’s top export sector.
In a May news release, Dominguez said the DOF wants to make the tax system more equitable by replacing the 5-percent gross income tax with a 15-percent tax rate on net taxable income. At the same time, this will allow firms to keep their income-tax holiday and other income-based incentives.
For Lachica and his group, this may push electronics firms to the brink, as it could increase the cost of operations by up to 40 percent. He said this is unfavorable to them, given that they are employing some 3.2 million workers, direct and indirect.
Richard Cohen of Maxim Integrated also argued the government might need to think twice about imposing the 15-percent tax rate.
“The economic environment of the Philippines should remain competitive to be able to attract [investments in] expansions. In some aspects, the Philippines is not already competitive, like in power,” Cohen said.
Lachica also said due diligence could at least be given to the sector, as it pumps more than half of the country’s commodity exports year after year. He said imposing the 15-percent tax rate could lead to a migration of investors to neighboring Southeast Asian countries.
“Vietnam is just sucking in all foreign investments given its 30 percent less power cost and 40 percent less labor cost. Our suggestion to Secretary Dominguez is to look at the cost of operations of electronics firms.