THE Department of Finance (DOF) on Tuesday disputed critics’ claim that the House version of the second-round tax reforms in the so-called Trabaho bill will, in fact, cause worker dislocation, but the claim was met with skepticism by the Senate Ways and Means Committee chairman.
Sen. Juan Edgardo Angara doubted the DOF assurance on hearing from a labor official that they are still assessing the possible impact of the measure on jobs, given widespread fears among business groups that the loss of fiscal incentives from key industries would outweigh the vaunted generation of more funds for investments as a result of the reduction of the corporate income tax (CIT).
DOF Undersecretary Karl Kendrick T. Chua told financial reporters that implementation of the CIT cuts under the second package of the Comprehensive Tax Reform Program (CTRP) will generate more funds, in turn enabling more companies to invest and generate more jobs.
House Bill 8083, passed on third and final reading by the House of Representatives, is its version of the DOF-proposed second package of the CTRP. The House dubbed it Tax Reform for Attracting Better and High-quality Opportunities (Trabaho, the Filipino word for jobs).
“Well there is significant reduction in CIT that creates a lot of new money to invest and expand and create jobs. And we are going to work with the DTI [Department of Trade and Industry] and BOI [Board of Investments] to ensure that the SIPP [Strategic Investment Priority Plan] really provides incentives to deserving firms, so we can preserve the good jobs,” Chua said at the sidelines of the Senate Ways and Means hearing on the Trabaho bill on Tuesday.
Department of Labor and Employment (DOLE) Director Dominique R. Tutay said that the labor department and the DOF are in the process of completing a joint study on the impact on jobs of the Trabaho bill, to which, Chua pointed out that there is no joint study being conducted.
“I want to clarify that there is no joint study, they have a model; they shared it with my team, we are looking at the model and we are going to try to work and run the model. So we have not even started on any study, but since they shared their model, we’ll gladly take a look at it,” he added.
Stalled deliberations
Angara, who chairs the Senate Ways and Means panel, said the committee would not proceed with its deliberation of the Trabaho bill unless the government can present definitive data on its impact on jobs.
“I’m surprised that the Lower House passed this measure even without such study. The government should really take this issue on jobs seriously. The bill should stay true to its name—that it would create more jobs rather than kill them,” Angara said.
During the hearing, the DOLE revealed that based on their job displacement monitoring, 30,000 jobs in the industry and services sectors were lost in the first quarter of 2018.
Following the passage of HB 8083 or the House’s version, the Semiconductor and Electronics Industries in the Philippines Foundation Inc. (Seipi) released a statement that the bill would force them to lay off 140,000 workers.
HB 8083 provides for P500 million to be used for cash grants for displaced workers. An additional P500 million would be allocated for targeted trainings and skills upgrading.
Based on data from the DOF, a total of 1.7 million direct and 7 million indirect jobs were generated by companies registered with investment promotion agencies (IPAs).
“It cannot be done [the jobs losses assessment], because everyone gets a chance to apply for new incentives, and second you have to wait for the DTI and BOI to determine what industries are in the SIPP so it cannot be done. That’s why we don’t want to blurt out a number that has no basis, we have to wait for the process to begin formally,” Chua said.
Package 2 aims to reduce CIT rates while implementing incentives reforms, with the DOF eyeing for the passage of the measure before the end of the year.
“We recognize the value of incentives as a key component of our country’s policy tool kit. We assert, however, that incentives should not be given indiscriminately at the expense of building up more powerful attractions: first, a skilled and hardworking talent pool that needs sufficient human capital investments; second, an ambitious infrastructure development program that requires fiscal commitment; and third, a sizeable small and medium enterprise community that deserves to be treated fairly,” he added.
DOLE projections not done
It will still take some time before the government can come out with firm projections on the potential impact of the Trabaho bill, labor officials said after attending the Senate hearing on the Trabaho bill.
In a phone interview, DOLE’s Bureau of Local Employment (BLE) Director Domi-nique R. Tutay told the BusinessMirror
they are still in process of creating the projection model for Trabaho bill.
“We are coordinating with the ILS [Institute for Labour Studies] on this. They were supposed to use the [projection] model of ILO [International Labor Organization] on this but they told us it is currently not working,” Tutay said.
“Our personnel are currently trying to run this using their own system,” she added.
The labor official said they are still in the process of coordinating with the National Economic and Development Authority (Neda), the DOF as well as the private sector to determine the data they will input in the system once it is completed.
Concerns over the potential displacement because of the Trabaho bill were raised by some business sectors earlier this month since it will remove some tax incentives in economic zones.
Representatives from the semiconductor industry said this could translate to a 140,000 labor displacement in their industry alone.
Citing current displacement trends, Tutay said the projection is unlikely.
“We are still analyzing date in the subsectors at the moment to see if this could be supported by current trends,” Tutay said, referring to the concern of the semiconductor industry.
While she admitted that the number of the displaced increased by 5,000 from January to June this year compared to the same period last year, she said it could not be all attributed to the first phase of the TRAIN law that took effect in January.
“There are many factors in the retrenchment like redundancy and lack of market,” she said.