Citing the high cost of operating in the Philippines, local hotels have asked the government to bring back tax incentives that were recently taken away by the Board of Investments (BOI).
In an open letter published Monday, the Philippine Hotel Federation (PHF) said the BOI’s recent decision to remove tax holidays for hotels in Metro Manila, Cebu, and Boracay would slow the development of the local tourism sector, which was earlier identified as a major growth area for the local economy.
BOI’s Regulation No. 2013-001 aims to discourage hotel operators from locating in the already-established areas of Metro Manila, Cebu, Mactan and Boracay.
Instead, the government hopes that hotels look into new locations that have the potential to become major tourist draws.
The hotel group asked President Aquino to revoke the BOI rule to ensure the competitiveness of hotels operating in the Philippines that have to compete with rivals in Southeast Asia all looking to attract tourists from outside the region.
“Under the said BOI regulation, projects in these four major areas will only be entitled to capital equipment incentives,” the letter read.
The exemption from paying income tax, which the group described as the “most significant” incentive offered by the government, would no longer be granted.
“Tourism is recognized as an engine of investment, employment, growth and national development,” the PHF said, adding that the industry would help in the administration’s goal of alleviating poverty, especially in the countryside.
The group also said the government’s own goals for the industry, outlined under the National Tourism Development Plan, would be at risk of not being met if incentives are taken away.
The government is trying to attract 10 million foreign tourists to the country every year by 2016—up from just 3 million in 2010.
Despite being cited in the 2013 World Economic Forum Travel and Tourism Competitive Report as the most improved country in the region, the Philippines continues to struggle with high costs, particularly in starting new businesses.
PHF said this continues to be a major roadblock to the entry of new fixed investments in the country.
PHF said the incentives for the tourism industry should be administered by the Tourism Infrastructure and Enterprise Zone Authority (Tieza), which was formed in 2009.
However, the agency is still awaiting the Bureau of Internal Revenue’s and the Department of Finance’s issuance of the necessary revenue regulations that would give Tieza the power to grant tax incentives for tourism projects.