Zero tariff OK’d for equipment, raw materials

The Department of Finance (DoF) has agreed in principle for a zero tariff rate on imported capital equipment and raw materials not locally available. However, the DoF still wants to review the matter of raw materials especially on the question of substitution.

To make up, though, for the corresponding revenue loss, the government will impose a one percent service fee.

The DoF decision is in response to the request of local industries to lower tariff rates on industry imports.

The Federation of Philippine Industries (FPI) has asked the Department of Finance to reduce to zero the tariff rates on capital equipment, raw materials and semi-processed materials not locally produced.

These are slapped a duty of three percent.

FPI officials had met with Finance Secretary Isidro Camacho and Undersecretary Cornelio Gison at which meeting Garcia pointed out that the Philippines is already considered high in terms of labor, power and transport costs.

"Industry needs to offset these costs through the proposed reduction in tariff rates," Garcia said.

The FPI said that "if government wants to help industries, they should increase tariff by five percent on locally finished goods and reduce tariffs on raw materials."

Camacho said the DoF supports a case-to-case basis approach on the zero duty.

However, Gison revealed that the DoF had earlier communicated to the National Economic and Development Authoirty that the DoF has no objection to the zero duty provided that the grant is limited to export enterprises importing capital equipment.

The DoF further indicated that they are amenable to reducing the tariff to one percent just to cover the cost of regulation.

The DoF estimated that a three percent reduction, meaning a zero tariff rate, on capital equipment would result in a revenue loss of P1.2 billion, whereas a one percent reduction would mean a P800 million loss.