P-Noy: Now you see him, now you don’t

The president was expected at the Joint Foreign Chambers (JFC) “Arangkada Forum” at the Shangri-La Makati the other day, but P-Noy was a no-show once again. The JFC is the biggest coalition of foreign investors in the country, and so it would have been a perfect opportunity for the President to reassure foreign businessmen that the situation is under control in light of the Jan. 25 Mamasapano debacle.

People are beginning to wonder if the President is in hiding, reluctant to face the continuing questions surrounding the death of the 44 Special Action Force personnel who were sent to arrest Malaysian terrorist Marwan and bomb maker Basit Usman. 

While many business groups feel that calls for his resignation are totally unwarranted because this would only set back the constitutional process including of course the country’s economic gains, these “disappearing acts” during important occasions (the welcome honors for the SAF 44, the TOYM awards and now the JFC Arangkada Forum) could be construed as “constructive resignation” – the terminology that the Supreme Court used to “legalize” the ouster of Joseph Estrada as president. It can be recalled that Erap left Malacañang at the height of EDSA Dos following the walkout from senators during the impeachment trial that was subsequently aborted – and his leaving Malacañang Palace was used as the basis for the Supreme Court ruling that he had “constructively resigned” the presidency.

Investors leaving due to burdensome tax rules

At the Arangkada Forum, businessmen outlined the key areas that should be addressed to enhance the country’s attractiveness as a business destination and boost job creation efforts, stressing that inclusive growth could only happen if long-term reforms in the political, economic and social spheres are set in place.

Like in the previous Arangkada forums, the business groups reiterated the call for the amendment of restrictive economic provisions in the 1987 Constitution to pave the way for more foreign investments as the economy is opened up. Many believe that relaxing the over-protectionist provisions would prove to be beneficial in the long run as it would give the country additional leverage especially with the upcoming Asean economic integration. If the President is wiling to consider charter change to accommodate the creation of the Bangsamoro, then all the more that he should be open to the economic amendments that the business sector has been advocating, several businessmen commented.

One other concern is the proposed House Bill 2942 also known as the Tax Incentives Management and Transparency Act, that could cause additional burden to investors especially on the issue of value added tax refunds – something that has been hounding investors, for a decade. Under the proposed bill, tax incentives would fall under a proposed tax expenditure account in the General Appropriations Act. Under the bill, tax expenditures wouldbe automatically appropriated and the Bureau of Internal Revenue would also have the power to prescribe additional requirements for tax administration and enforcement.

The DTI said the proposal could undermine the country’s attractiveness as far as investors are concerned, noting that the issue of VAT refunds is something that has become an “operational nightmare” for Japanese and European investors. It can be recalled that Japanese companies have been complaining about the changing rules on tax incentives, in particular Memorandum Circular 54-2014 that prescribed new procedures for the filing of tax credits or value added tax refunds.

In the memo, the BIR has set a period of four months or 120 days to act on an application for VAT refund – but the catch is that if the BIR does not take any action on the application after the said period, then the application is as good as denied. Meaning to say, a lazy or careless employee could simply sit on the petition for a VAT refund and there’s nothing that anyone can do about it.

Obviously, these are the things that could turn off investors big time, and companies are leaving because they are starting to find the business climate here as unfriendly. Take Samsung, for instance, which is reportedly pulling out from the country and relocating to Vietnam, where it currently has four manufacturing facilities located in Ho Chi Minh City, Bac Ninh and Thai Nguyen. In fact, Microsoft is also closing down its operations in Beijing and Dongguan in China, as well as factories in Mexico and Hungary, and transferring them to Vietnam. 

Thousands of jobs are now opening up in Vietnam, although the search is on for middle and high-ranking company officials who also have good communication and presentation skills – something that Filipinos are known to be good at.

Aside from taxes, other factors that are driving expats to leave the country are the pollution and traffic in the Metropolis. In fact, some embassies have issued warnings to the effect that if they have children and susceptible adults in the family, they should reconsider plans of living in the city due to serious health concerns.

Good business news: DTI to issue refunds

The Business Delegation Secretariat of the Department of Trade and Industry sent letters to businessmen announcing that it has completed the accounting of expenses during the presidential trips abroad since 2011, and that it is issuing a refund of the “excess assessed share” made on businessmen who accompanied the President during these official travels.

This is the first time that a government agency would be issue refunds for excess assessments on presidential travels, and no matter how small the amounts may be, the move is certainly appreciated precisely because the small amounts tend to be overlooked, if not deliberately ignored and therefore not returned at all. Credit should go to Trade Secretary Greg Domingo and, of course, to the President for this unusual step taken to emphasize the “straight path.”

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