MANILA, Philippines - The local manufacturers of electronics are asking the government to delay any plans of rationalizing the incentive scheme it offers to new and existing investors.
“They should not change the rules in the middle of the game,” Louie R. Macatiag, head of the finance committee of the Semiconductors and Electronics Industries of the Philippines Inc. (SEIPI) said in an interview.
According to Macatiag, giving less tax perks would not help the country attract investments especially during these times of crisis.
He said this is not the time especially since our neighboring countries are offering good investment packages. Likewise, he said the higher power cost is already a big stumbling block for investors.
On the other hand, the Consumer and Oil Price Watch (COPW) said the government must review the tax perks given to investors instead of increasing the value added tax (VAT) imposed on consumers.
In a statement, COPW chairman Raul T. Concepcion told the government to look into the structure of income tax holidays (ITH) being enjoyed by a few people. He said it is better to re-structure this rather than allow for higher VAT that will be a burden to 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 Economics Professors Dante Canlas, Felipe Medalla and Benjamin Diokno,” the chairman added.
Concepcion explained that under the law, businesses operating in export processing zones enjoy a very high ITH. As a result, these firms only remit five percent of their gross income to the government.
“On top of this, they have an accelerated depreciation which means that they practically do not pay income tax,” Concepcion noted.
In spite of this, Concepcion underscored that his group understands the value and importance of encouraging investors to infuse money into the country. However, he said there is a need to review the matter for the benefit of the majority.
The government is divided in the issue of income tax holiday. In fact, the bills for rationalizing the incentives are now being discussed in the House of Representatives. It has been pending for years.
The Finance department has been working on rationalizing the incentive scheme in order to collect more tax revenues.