Job contingency plan in 2010 IPP nixed

MANILA, Philippines - The government has revised the draft 2010 Investment Priorities Plan (IPP) by removing the contingency section which contains the employment saving mechanism, saying the crisis which threatened many economies worldwide is already over.

For the first time last year, the government decided to include a contingency plan which gives companies tax perks for keeping their employees. However, the Board of Investments (BOI) has decided to remove the contingency component on the proposed 2010 IPP because in their latest board meeting, the group said “the crisis is over.”

BOI managing head Elmer C. Hernandez said they noted reports that the National Economic and Development Authority (NEDA) has declared the Philippines not in crisis anymore.

In a statement last November, NEDA acting director general Augusto Santos said: Indeed the global crisis is not over, but the worst is over. We have reasons to be more confident.”

Hernandez said they will make the final recommendation on the draft IPP  regarding the contingency measure once they verify the NEDA reports.

There were four criteria under job saving or creation projects. First is to retain investments and maintain current number of employees. Second, retain investments and increase current number of employees. Third, increase investments and maintain current number of employees and fourth, increase investments and increase current number of employees.

Under the law, firms that will not have additional investments do not qualify for income tax holidays. However, because those were extraordinary times, the government gave additional deduction for labor expense. That brought their taxable revenues down, thus reducing tax payments to the government.

Hernandez said they will only consider applications under the contingency measure submitted last December.

Recently, the BOI granted incentives under the contingency measure to semiconductor firm Yushiko Industries. The firm will be entitled to a three-year income tax holiday (ITH) but will have to waive all other remaining incentives given to them by the government.

Hernandez said they gave the ITH to Yushiko because the semiconductor industry suffered heavily last year as orders waned due to the global financial crisis.