About 110,600 workers in the apparel and leather goods industry might lose their jobs when the cost of doing business becomes more expensive because of rationalized tax incentives.
This, according to a 2018 survey made by the Confederation of Wearable Exporters of the Philippines (Conwep), which is composed of companies who export clothes and leather goods.
Highlights of the survey were shared last week in a press briefing that Conwep held jointly with other business groups to raise yet again their concerns about the government’s move to change the tax perks offered to export-oriented companies.
Conwep’s legal counsel, Jeriel Domingo, said with foreign investors having to pull out and local manufacturers losing clients due to increasing prices, some 36,000 apparel workers of small-sized firms, 57,600 garment workers of mid-sized and large firms and 17,000 workers of mid-sized and large firms producing leather goods would be affected.
Depending on its size, a company could even shut down sooner than later, Conwep executive director Maritess Jocson-Agoncillo said.
The survey showed a small company with 1,500 workers or below could close shop in six months to one year. If the company has about 3,000 to 5,000 workers, and it produces mid-sized products like jeans, then it could lose half of its workers in 12 to 18 months.
For companies producing higher end products like suits, 30-32 percent of workers would be displaced in 12 to 18 months.
At over 110,000 job losses, that would be over 44 percent of the combined workforce of both industries.
The survey was made in September last year, when lawmakers were duking it out to pass the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill. The bill, which only made it in the lower House, will lower the corporate income tax while rationalizing tax incentives.
It will likely be revived in the next Congress, run by mostly allies and bets of President Duterte.
Among the tax perks that will be removed in the Trabaho bill is the 5-percent gross income earned tax that companies in economic zones pay in lieu of local and national taxes. The perk currently has no expiration date, thus contrary to the administration’s tax reform principle that tax perks should be time-bound.
The Department of Trade and Industry had suggested to increase this to 8 percent instead. However, even this may be too much for Conwep, which has small profit margins, officials said.
Domingo said member companies already had to sell their goods at lower prices to cope with competition in other countries.
The Board of Investments previously had said the Philippine garments and textile export sector, a sunrise industry in the 1990s, used to be worth $3 billion industry.