RP concerned over China move to tax semiconductors

The Philippines is as concerned as the United States about the recent move of China to impose a 17-percent value-added tax (VAT) on the sale of semiconductors within the country.

However, locally produced semiconductors in China would be entitled to a 14-percent rebate.

The 17-percent VAT, thus, would only put at a disadvantage those semiconductors which are produced outside of China.

According to Trade and Industry Secretary Cesar V. Purisima, the Philippines will not actually be greatly affected by China’s imposition of a VAT on semiconductors since the Philippines’ primary markets are Japan and the United States with China as a still minor market.

The one who is most aggressive about filing a complaint against China in the World Organization (WTO), Purisima said, is the US because it is the one immediately and directly hurt by the imposition of the VAT.

The Philippines, though, Purisima said, will support the US, acknowledging that since the semiconductor industry is a very important source of export revenue "anything that would disrupt the level playing field in this area, especially in a large market like China or a growing market like China, is of concern to us."

The Philippines, however, Purisima said, would still have to consult with its "friends in ASEAN" and even with "our friend China" about following the US in filling a case against China with the WTO.

The imposition of a 17-percent VAT on the sale of semiconductors could be interpreted as a form of non-tariff barrier contrary to China’s membership in the WTO and it pledge to gradually lower trade/tariff barriers.