Japanese envoy takes up cudgels for investors worried by Trabaho bill

The Japanese government has urged the Philippines to consider the points of view of the more than 1,500 Japanese investors in the country in the crafting of the second package of the comprehensive tax reform program dubbed “Trabaho Bill.”

Japanese Ambassador Koji Haneda made this pitch during the Special Session on “Towards a Deeper PH-Japan Economic Partnership” on the last day of the 44th Philippine Business Conference at the Manila Hotel yesterday.

In a speech, Haneda noted there are 1,500 Japanese companies operating in the country mostly in the manufacturing and outsourcing sectors. Of this number, 900 are located inside the various economic zones of the Philippine Economic Zone Authority (PEZA). These companies employ 250,000 Filipino workers.

As PEZA-registered enterprises, these firms enjoy tax incentives under PEZA including income tax holiday (ITH), five percent tax on gross income earned after ITH, and duty-free importation of capital equipment.

Through the Japanese Chamber of Commerce, these investors have opposed the proposed Trabaho Bill as this will shorten the 5 percent tax on gross income earned, which they currently enjoy on a perpetual basis.

In a survey, Japanese companies admitted that the number one reason they locate in the Philippines is the generous tax incentives being offered by PEZA.

Already, officials of the Japanese Chamber have warned that if the TRABAHO Bill is passed into law there will be relocation and halt of expansion programs of Japanese companies to other ASEAN countries. Latest investments registered by PEZA have dropped by 56 percent as its locators have held off expansion projects because of the uncertainty brought about by the TRABAHO Bill.

“Japanese firms have conveyed their views to the Philippine side and we hope their views will be appropriately considered in the TRABAHO Bill,” he said.

Japan is the number one source of foreign direct investments for the Philippines with cumulative FDIs of 1668.8 billion from 2000 to 2017, he said. In 2017, Japanese FDI registered 132 billion or 30 percent of total FDIs in the country.

Japan Embassy Minister for Economic Affairs Makoto Iyori also echoed the Ambassador’s sentiment. In a brief interview with reporters, he said that Japan would like to have a more comfortable environment for companies in the Philippines.

While Japan does not want to unilaterally impose what environment system they would like for investors in the country, Iyori said, “We want (government/legislators) to listen to what these Japanese companies operating here are saying.”

In August this year, Japan extended the visa for Filipinos to 10 years noting there have been unprecedented influx of Filipino tourists reaching 424,121 in 2017 or five times higher from 5 years ago.