Virus-clobbered firms remind PH: You had us at your worst
Already battered by a pandemic, 14 local and foreign business groups have asked the government to exempt companies in economic zones from a tax bill that would not only rationalize tax breaks but would also walk back on contracts that assured them of their perks.
“These provisions were introduced 25 years ago after destabilizing coups, the Pinatubo eruption, and the turnover of empty military bases at Clark and Subic when the government became serious about attracting foreign investment,” the businesses said of the reason why they came in amid uncertainties in the economy back then.
They reiterated their appeal for a status quo, as the Senate tackles the Corporate Recovery and Tax Incentives for Enterprises Act (Create). It is the latest iteration of the Duterte administration’s tax reform package that seeks to rationalize tax incentives and cut taxes for companies outside ecozones.
The long list of names that signed the joint statement included members of the 3,000-strong Joint Foreign Chambers of the Philippines and local groups such as the Makati Business Club and Management Association of the Philippines.
“To attract investors, after the initial income tax holiday incentive expired, a 5 [percent] gross income earned tax [in lieu of local and national taxes] would apply. Investors were told this rate would continue indefinitely, and they believed the government,” the groups said.
“But today the government talks about imaginary ‘lost revenue,’ and seems unhappy that the firms have been profitable and expanded operations in the country. They are likewise insisting that companies will invest regardless of incentives,” they said.
They reminded the government other countries would fight fiercely for the few remaining investment promises, especially at a time when economies are struggling through a recession.
They cited estimates from the United Nations Conference on Trade and Development, which predicted foreign direct investments in emerging Asia would be 35-50 percent lower than in 2019, and that these would unlikely return soon to prepandemic levels.
“The proposed Create bill is the fourth version of a tax bill since December 2017 which, as originally drafted, would have resulted in many of these firms downsizing or departing the country,” they said, although they acknowledged that subsequent versions of the bill “made adjustments to encourage the firms to continue to expand in the Philippines.”
They said, however, the text in the present bill was not clear in terms of whether or not existing businesses can reapply for tax breaks for their expansion projects. INQ
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