Bataan investors defend need for incentives
BATAAN, Philippines – The Department of Finance (DOF) said the second batch of tax reforms that hurdled a House committee was already amended to cater to the concerns of both foreign and local investors in the Philippines.
This was Finance Undersecretary Karl Chua's message to investors and locators of the Freeport Area of Bataan (FAB) on Thursday, August 16.
He joined the closed-door meeting of Speaker Gloria Macapagal Arroyo and House committee on ways and means chairperson Dakila Cua with FAB investors held in Mariveles, Bataan.
"I told them the bill we have in Congress have undergone several amendments precisely to cater to some of their concerns, but we also have national interest to promote beyond the locators because there are also thousands of Filipinos and small and medium enterprises paying the regular rates and contributing also jobs and investments," said Chua.
"So we are trying to strike a balance," he added.
The meeting was called so the House leaders and DOF could clarify some provisions of the Tax Reform for Attracting Better and Higher Quality Opportunities (Trabaho) bill that FAB investors were "worried" about.
The Trabaho bill was already approved by the ways and means committee on August 7.
The bill will now go through its 2nd and 3rd readings at the House plenary before being transmitted to the Senate, where it will have to go through another 3 readings before President Rodrigo Duterte may sign it into law.
Trabaho bill at a glance: The measure aims to cut corporate income taxes by 2 percentage points per year starting 2021, eventually bringing down the current 30% to 20% by 2029.
Trabaho also seeks to rationalize fiscal incentives or remove certain perks. The bill retains the current incentives for two years, for investors to have enough time to adjust to the new tax scheme.
The DOF estimated that the government lost some P178 billion in potential revenue in 2016 due to redundant tax incentives. (READ: EXPLAINER: Why the government is pushing for 2nd TRAIN package)
What were the FAB investors' concerns? Cua said one major question was whether or not investors would have to pay value-added tax (VAT) should Trabaho become a law.
He told them that under the bill, companies are exempt from paying VAT when they are "90% exporters."
"I also updated them on the longer years of incentive availment if they are investing in poor areas or relocating outside Manila," Cua said.
Arroyo also said the investors pointed out their incentives granted by the FAB are good for 20 years, yet the timeframe is longer in other investment promotion agencies in the country.
"And then they were discussing this one, for further study, they said that in the Freeport of Bataan, their incentives are 20 years. So it is time-bound, whereas in the others, it's forever. So that's something that the DOF will look at," said Arroyo.
Patrick Martinet, president of the Freeport Area of Bataan and Investors Association, said they seek incentives due to the rising costs of utilities and even manpower.
He then urged the Philippine government to address corruption first before focusing on the Trabaho bill.
"[The government should] try to address corruption, bribery, and try also to increase the capacity of the government to increase tax collection. This means oblige people who don't pay tax to pay tax," he said.
What's next? Chua said he will be relaying to his superiors at the DOF the concerns of the Bataan investors for now.
But no promises were made during the meeting regarding changes to the Trabaho bill. These may be introduced during the bill's period of amendments at the House plenary.
"Well, we didn't agree on anything.... So this is more of a listening [time] and I will bring back to my bosses the concerns and see if we can address them," said Chua. – Rappler.com