Electronics industry fears 40% add’l operating costs under tax package 2

The electronics industry yesterday warned that the proposed 15 percent corporate income tax (CIT) under the package 2 of the government’s comprehensive tax reform program would jack up their operational costs by an average of 40 percent further adversely impacting on their competitiveness.

Danilo Lachica, president of the Semiconductor & Electronics Industries in the Philippines Foundation Inc. (SEIPI), told a press conference at the ongoing Philippine Semiconductor & Electronics Convention and Exhibition 2018 at the SMX Convention Center that the 10 percent CIT is the figure that “electronics companies can live with” based on the analysis conducted by the organization.

Based on SEIPI’s study, the 15 percent tax proposed by the DOF would mean additional average 40 percent in operational costs.

Lachica also cited Vietnam for “sucking foreign investments” because of its investment friendly policies such as favorable tax incentives, lower cost of labor, and land access to the rest of Asia.

While the Department of Finance and Congress are still debating on the final form of the second package of the government’s comprehensive tax reform program, Lachica said this has created concerns for companies whether they will pursue their expansion or relocate elsewhere.

“At the end of the day, it is all about competitiveness,” he stressed adding that if companies no longer expand here and produce new products all electronics manufacturing are already low-end products that are of no use to the multinational corporations, resulting in the closure of operations. This means affecting the 3.2 million direct and indirect workers of the electronics industry.

Glen Everette, general manager of Continental Temic Electronics (Philippines), Inc., said that the incentives being provided by the Philippines should be able to overcome the high cost of power and lack of infrastructure.

The German-owned Temic, which has more than 3,000 employees at its Laguna plant, has presence in more than 60 countries that they can easily choose which location can give them the most competitive advantage.

Everette said they have been steadily increasing their investments in the country. He said they are not adopting a wait and see attitude, but said that decisions have to made and when that time comes they have to choose the most competitive location.

Kosei Koba, CEO and President of Ibiden Philippines, Inc., said that SEIPI members are supportive of the government’s tax reform program but it should also consider that the country’s foreign direct investments lower foreign direct investments inflow compared to the rest of the region.