DOF: Reforms vital to sustain FDIs
THE Philippines should undertake institutional and legislative reforms to sustain the monthly improvement of job-generating foreign directing investments (FDI), according to the Department of Finance (DoF).
“Although strict quarantine measures implemented in the final weeks of the first quarter may have put FDI inflows temporarily on hold, the quick recovery of FDI in the subsequent months suggests that the Philippines’ long-term prospects remain positive in the eyes of investors,” the Finance department said in its latest economic bulletin released on Sunday.
Latest data from the Bangko Sentral ng Pilipinas ( BSP) showed FDI net inflows in July climbed to its highest level in seven months at $797.46 million. It expanded by 60 percent from the $590 million a year earlier.
“The FDI net inflows rose for the third consecutive month on the back of investors’ improving sentiment due in part to easing of containment measures, and some signs of gradual improvements in economic activity based on high-frequency indicators,” the central bank has said.
In the first seven months of the year, FDI net inflows shrank by 10.9 percent to $3.79 billion from $4.25 billion a year ago. The BSP sees these jobs-generating investments to settle at $5.6 billion this year, larger than its previous outlook of $4.1 billion.
Moving forward, the DoF stressed that “sustaining investmentincentivizing activities such as making doing business easier and continuing to invest in infrastructure will be key to attracting more investment into the country.”
“Reforms such as Create, FIST, and Pifita, along with amendments to the Commonwealth-era Public Service Act and the Retail Trade Liberalization Act will also help encourage more foreign investments which, in turn, will expand consumer choices and the pool of employers,” it also said.
The second package of the government’s Comprehensive Tax Reform Program, Create proposes to reduce the corporate income tax from the current 30 percent to 25 percent this year, and further trim it by 1 percentage point starting in 2023 to reach 20 percent in 2027. It also seeks
to rationalize incentives currently being enjoyed by select firms especially those in economic zones.
FIST or Financial Institutions Strategic Transfer, meanwhile, aims to encourage financial institutions to sell their nonperforming assets to asset management companies that specializes in resolving distressed assets by providing fiscal incentives. These include exemption from documentary stamp tax, capital gains tax, creditable withholding tax and value- added tax or gross receipts tax.
The Pifita bill or Passive Income and Financial Intermediary Taxation Act will complement the Tax Reform for Acceleration and Inclusion law by making fairer intermediary taxes, paving way for a simpler taxation of passive income, financial services and transactions.