AmCham claims 700,000 jobs at risk with CITIRA
American businessmen in the country warned that the passage of the Corporate Income Tax and Incentive Rationalization Act (CITIRA) could potentially result in the loss of about 700,000 jobs for Filipinos in industries that currently avail of fiscal incentives of the Philippine Economic Zone Authority (PEZA).
American Chamber of Commerce of the Philippines (AmCham) Senior Advisor John Forbes issued this warning at the maiden hearing of the Senate Committee on Ways and Means headed by Senator Pia Cayetano and attended by representatives of several industries as well as the Philippine Economic Zone Authority (PEZA) led by Director General Charito Plaza.
“The Philippines is at risk of losing about 700,000 jobs if CITIRA bill will be passed,” said Forbes.
Forbes earlier said that a survey among Americans and other foreign chambers on TRAIN 2 or the CITIRA Bill showed they would reduce employment, hold off expansion and perhaps leave should the PEZA incentives get overhauled.
“You cannot expand if you cannot predict your future. With uncertainty over how the GIE (gross income earned )would be replaced you go elsewhere that’s why the country’s foreign direct investments are down,” Forbes said.
The CITIRA bill aims to cut the corporate income tax from 30 percent to 20 percent by 2029 and likewise remove redundant fiscal incentives that are being enjoyed by certain sectors such as the manufacturing and information technology-business process outsourcing (IT-BPO) companies.
Department of Finance (DOF) Undersecretary Karl Chua made a stand that the government is losing about 1441 billion in forgone revenues because of these incentives, and 1345 billion of these were granted to PEZA firms. DOF is hoping to target priority industries and rationalize existing tax incentives.
PEZA on the other hand said that they have brought in at least 13.7 trillion worth of investments from 1995 to 2016, aside from generating around 1.5 million direct employment and 7.5 million indirect employment to Filipinos. Plaza said that CITIRA is ideal only for domestic enterprises and not for export-oriented industries.
Earlier, PEZA, ecozone developers and locators yesterday said they are amenable to increasing the GIE tax from 5 percent to 7 percent without a sunset clause nor transition provision to corporate income tax (CIT) in what could be a softening of their original “non-negotiable” stance in the current push of the Duterte administration to replace the GIE with the CIT regime.
The groups said this during a hastily called press conference by PEZA Director General Charito B. Plaza, who was rumored as the next government official in line for termination because of her strong opposition on the government’s move to overhaul the tax incentives to exportoriented investors under the proposed CITIRA Bill.
“So, this is our compromise, all other PEZA incentives we are united. We should be amenable to 7 percent GIE but no sunset clause or transition to CIT,” Plaza said saying majority of their investors would go for this offer. Earlier in the press conference, the groups said their position for a status quo on the PEZA incentives regime was “non-negotiable.”
The government, through the Department of Finance, has called for a shift from GIE tax to CIT, which current 30 percent rate is going to be reduced gradually over a certain period of time.
Plaza, who just arrived last night from an investment promotion speaking engagement in China, was flanked by leaders from various ecozone related organizations supporting the agency’s position for a status quo of their incentives.
The groups warned of serious economic backlash should Congress pass the CITIRA bill and missed opportunities for the Philippines, which is supposed to gain from the relocation of companies to ASEAN countries due to the US-China trade war, the EU-GSP Plus privileges, and the Hong Kong trouble.
F. Francisco S. Zaldarriaga, president of the Philippine Ecozones Association, a group of ecozone developers, said they are left with a supply glut in ecozone spaces because companies are not expanding as anticipated. He said that developers expanded a few years ago as they saw the momentum and were running out of spaces with companies flocking to the Philippines. A developer invests between 13 billion to 15 billion per ecozone project.
But with the lingering uncertainty brought out by TRAIN 1, TRABAHO Bill, and now CITIRA bill, companies have stopped expanding or holding off expansion program.