MANILA, Philippines - The government should seek a review of the tax perks given to investors instead of resorting to an increase in the value added tax (VAT) imposed on consumers, the Consumer and Oil Price Watch (COPW) said.
In a statement, COPW chairman Raul T. Concepcion said the government should look into the structure of income tax holidays (ITH) being enjoyed by a few people. He said it is better to restructure this rather than allow for higher VAT that will burden more Filipinos.
“While we want to encourage foreign investments, these incentives put pressure on government’s capacity to collect revenues,” Concepcion said.
“Therefore, there must be an urgent review of our investment incentives instead of increasing the VAT rate from 12 percent to 15 percent as proposed by UP (University of the Philippines) economics professors Dante Canlas, Felipe Medalla and Benjamin Diokno,” Concepcion added.
He explained that under the law, businesses operating in export processing zones enjoy an extended ITH. As a result, these firms remit only five percent of their gross income.
“On top of this, they have accelerated depreciation which means that they practically do not pay income tax,” Concepcion noted.
Despite this, Concepcion underscored that his group understands the value and importance of encouraging investors to infuse money in the country. However, he said there is a need to review the matter for the benefit of the majority.
The government is divided on the issue of ITH. In fact, legislative bills rationalizing the incentives are now being discussed at the House of Representatives.
The Department of Finance has been working on rationalizing the incentive scheme in order to collect more tax revenues.
On the other hand, the Department of Trade and Industry has been pushing for incentives in order to entice more investors who can pump-prime the economy especially during these trying times of financial difficulties.
Earlier, the government announced it will continue to give tax incentives to the logistics industry because of the crucial role it plays in all functions of companies.
Trade Undersecretary Elmer C. Hernandez said the government, through the DTI, will continue to support the logistics industry by consistently including them in the preferred list of economic activities under the Investment Priorities Plan (IPP).
Yearly, businessmen who would like to invest in logistics may apply for tax breaks.
“The role of the links along the supply and value chains could not be undermined especially at these economically trying times when businesses are reforming, consolidating and streamlining,” Hernandez said.
He called logistics as the strategic lynchpin that binds virtually all functions within any company.
He explained that logistics plays a crucial role in influencing product development, manufacturing cycles, marketing, distribution, financial management and international sales.
“Given the apparent global slowdown, logistics and supply chain service providers could buck the odds and even grow in the coming years because companies from abroad continue to rationalize their operations or relocate them altogether and move to cost-effective locations such as ours,” Hernandez noted.