Foreigners invest here due to positive growth prospects — DOF

The robust foreign direct investments (FDIs) entering the Philippines were mainly attributed to the country’s “exciting growth prospects,” not on fiscal incentives that the government continues to offer to businesses, the Department of Finance (DOF) said.

In a statement, Finance Secretary Carlos G. Dominguez III explained yesterday that providing tax incentives would prove useless to investors if the economic climate remains unsafe and lacks the infrastructure, logistics as well as communications networks.

“We are correcting the fundamental problems that will make this economy perform at a higher horsepower rating. We are increasing the horsepower rating of the economy. We are removing the blockages that increase costs, that prevent trade from moving quickly,” Dominguez said.

Data from the Bangko Sentral ng Pilipinas (BSP) showed that foreign direct investments (FDIs) rose to $10 billion last year and continued to surge in the first half of 2018.

While FDIs were on the rise, the “approved investments,” which were those that coursed through tax incentive-providing investment promotion agencies (IPAs), declined in the first six months of the year.

“Last year, our FDIs increased to $10 billion. That is 100 percent more than it was in 2015. This year, in the first five months, it has increased by close to 50 percent (compared to the same period in the previous year),” Dominguez said.

“Now, they also say approved investments are down. Now, ‘approved’ means you asked for a tax benefit. Those investments are down but the investments that are coming in are not asking for tax benefits, they’re just coming in. Now that is very encouraging,” he added.

Dominguez said reducing the corporate income tax (CIT) while modernizing the country’s investment incentives under the second tax reform package, would make the business climate more conducive for small and medium enterprises (SMEs).

“I’m not against giving tax credits. But it’s time to modernize our system. It’s time to move ahead,” Dominguez said.

The package two of the Duterte administration’s comprehensive tax reform program (CTRP) will also bring the Philippines’ corporate income tax rate at par with the rest of the region, making the country more competitive and even more attractive to investors, the finance chief said.

According to Dominguez, every administration since the term of President Fidel Ramos had proposed the modernization of the country’s investment incentives system, but it is only now that the Department of Trade and Industry has been fully supportive of the proposal.

He said Package two will “incentivize” smaller companies by reducing the CIT rate from 30 percent to 25 percent and provide them with a more level playing field where incentives are made “transparent, targeted, more accountable, performancebased, and time-bound.”