Trabaho bill seen to hurt semiconductor firms

MANILA, Philippines — Semiconductor firms would likely incur as much as an 80 percent increase in operational costs with the shift to paying an 18 percent corporate income tax(CIT) from the current gross income earned (GIE) tax incentive under the TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities) bill.

“The proposal today is to go from five percent GIE to 18 percent CIT,” Automated Technology (Phil.) inc. CEO Vincent Abella said in a press conference yesterday.

“That on average is about 60 to 80 percent [increase] depending on the company’s numbers there will be an increase in operating costs for our electronics industry,” he added.

Abella emphasized that all the uncertainties surrounding the TRABAHO bill have cost the country about $1 billion in expansion and new investments in the industry, which have gone to other countries.

“We support the initiative of the government to alleviate poverty and promote economic growth and stability,”Abella said, but emphasized that the industry is rather concerned on the rationalization of tax incentives.

Under the proposed TRABAHO bill, the GIE incentive, which is an important consideration for firms opting to register with the Philippine Economic Zone Authority(PEZA), will be removed.

Instead of removing the incentive, Abella said they are suggesting to hike it to seven percent, which would still result in additional operating costs but at a lower rate compared to paying the 18 percent CIT.

“We’ve suggested that we move that to seven percent, that’s about a 40 percent increase in cost, but again reasonable enough for the companies to support the Build Build Build program of the government,” he said.

Abella said they would continue to take to Congress their concerns about the TRABAHO bill.

“We have to make the rounds again with the senators to explain, especially those who are not familiar with the industry,” Abella said.

Based on data from the Philippine Statistics Authority, electronics exports in the first quarter of 209 declined by 1.6 percent. Bulk or 65 percent of these exports are semiconductors or components of various applications.

Last year, the electronics sector recorded P3.625 billion in investment, according to the PEZA. This is 44.87 percent lower compared to the same period the prior year.