MINORITY Leader Franklin Drilon warned that at least 1,200 companies might leave the country if fiscal incentives are removed under the government’s proposed second package of tax reforms.
The estimate was given by the Department of Trade and Industry to senators during plenary debates on the 2019 budget.
A good number of investors are also turning uncertain about investing in the country if the tax reform package would be signed into law, Drilon noted.
“At least 1,200 enterprises might leave the country due to a sudden shift in the policy, which would cut the incentives given to foreign investors,” Drilon said during his interpellation of the DTI’s 2019 budget.
The country stands to lose about 150,000 jobs generated through incentives given by the country’s top investment promoting agencies, namely the Board of Investments (BOI) the and Philippine Economic Zone Authority (PEZA), he said.
“All of these will be in jeopardy once the TRAIN 2 is passed. I see a very dark future insofar as the foreign direct investments are concerned. We will not be surprised if next year, we will still be kulelat (laggard) again because of the lack of correct policy,” Drilon noted.
The second package of the Tax Reform for Acceleration and Inclusion (TRAIN 2) seeks to lower the corporate income tax and remove tax incentives from select businesses.
Drilon questioned the sudden shift in the policy, considering the fact that the country relies on fiscal incentives to attract investors.
“We have established that the principal tool for attracting foreign direct investments (FDIs) to come to our shores is the incentives granted under the law. However, it is not consistent with the reduction of fiscal incentives granted by investment promoting agencies to registered foreign companies, which the government is proposing under TRAIN 2,” he said.
“How do we reconcile these two conflicting policies?” Drilon asked.
It appears that the new policy being pushed by the economic managers does not sit well with companies currently enjoying these incentives, which would make them think twice about expanding their business if the incentives are removed, according to the senator.
“The conclusion that we can draw from these debates is that there is no deliberate and clear path to attract more FDIs, because the only tool that we have is incentives. Now, this grant of incentives is being muddled by these debates on TRAIN 2,” he said.
Drilon raised concerns over the poor performance of the country’s export industry.
He noted the Philippines is behind its Southeast Asia neighbors in terms of trade and cited the following export figures in 2017 – Singapore, $373 billion; Thailand, $237 billion; Malaysia, $218 billion; Vietnam, $215 billion; Indonesia, $169 billion; and Philippines $69 billion.
“We are kulelat. We are sixth in terms of export performance in Southeast Asia and we are even overtaken by Vietnam,” Drilon said.
He urged DTI to adopt measures on improving the export industry, citing the sector’s contribution to the country’s gross international receipts. (With GMA News/PN)