SEIPI wants FIRB investment approval threshold revisited

MANILA, Philippines — The Semiconductor and Electronics Industries in the Philippines Foundation Inc. (SEIPI) wants the next administration to reconsider and raise the threshold for investments being approved by the Fiscal Incentives Review Board (FIRB) and look at how the country can attract more foreign direct investments (FDIs).

During the Arangkada forum, SEIPI president Dan Lachica said the group would urge the next administration to revisit the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and transfer the power to the Philippine Economic Zone Authority (PEZA) to approve incentives for investments, with investments not coming in at levels the industry would like to see it.

He said the group wants the review  of CREATE to include the FIRB investment approval threshold and for  it to “increase to P3 billion as long as PEZA complies with FIRB requirements.”

Incentives for investments above P1 billion are approved by the inter-agency FIRB which is chaired by the Department of Finance and co-chaired by the Department of Trade and Industry, while those below the threshold are approved by investment promotion agencies including PEZA.

Even before CREATE was approved into law, the SEIPI has been pushing for raising the threshold warning of possible delays in approval of investments.

Beyond raising the threshold for investments to be decided on by the  FIRB, Lachica said the group is urging the government to study why other Southeast Asian countries like Indonesia, Malaysia, Thailand and Vietnam are able to attract more FDIs compared to the Philippines and respond accordingly.

While the country faces problems in terms of power cost and logistics, he said it has advantages in terms of its workforce.

“We have assets, advantages and of course, as far as labor is concerned, the median age of 23, 24 years old is much much better than what you have in other countries. So there are offsetting advantages in the Philippines and I just hope the next administration can revisit the ability to attract investments in the same scale as our ASEAN (Association of Southeast Asian Nations) neighbors because they are our competitors,” he said.

Meanwhile, Philippine Association of Multinational Companies Regional Headquarters Inc. (PAMURI) director Celeste Ilagan said in the same event, the group would want the regional operating headquarters (ROHQ)  to be eligible for registration for incentives under the CREATE.

Under the CREATE, ROHQs will be subject to the 25 percent corporate income tax (CIT) starting Jan.1, 2022 from the current 10 percent preferential tax rate.

“That is a huge jump from 10 percent to 25 percent. I don’t know if an amendment of CREATE would be able to cure that. But we at least would like to see that activities like ROHQ can continue to register with an investment promotion agency enjoying the incentives that the CREATE has put up for all of the investors and this will need the inclusion of ROHQ like activity in the SIPP (Strategic Investment Priority Plan),” Ilagan said.

Foreign business groups cited the need for the further reduction of the CIT for the country to be competitive in ASEAN.

“I really believe they need to continue to progress towards to the 20 percent level so you can remain competitive in ASEAN,” American Chamber of Commerce of the Philippines executive director Ebb Hinchcliffe said, citing the current 25 percent rate is still considered high in the region.

Canadian Chamber of Commerce of the Philippines president Julian Payne is hopeful “the next administration will put in a very specific plan to bring it down to 20 percent.”

European Chamber of Commerce of the Philippines president Lars Wittig said the group’s wish is to see the CIT reduced to 20 percent.

The CREATE brought down the CIT to 25 percent from 30 percent for large corporations and to 20 percent for those with income not exceeding P5 million.

The CIT rate will be reduced gradually  to 20 percent by 2027.