Vol. XXI, No. 165 [ Business World Online ]
Tuesday, March 25, 2008 | MANILA, PHILIPPINES
THE DEPARTMENT of Trade and Industry (DTI) is targeting to release by next month the investment priorities plan (IPP) for this year which lists industries eligible for incentives.
Trade Secretary Peter B. Favila said in an interview the new IPP is still being worked out but said the government is likely to give preference to start-up businesses.
"Our guiding principle when it comes to giving incentives is all those companies that have already grown and are making good profits [should not be given incentives]. The purpose of incentives is for start-up businesses," he said.
Mr. Favila declined to give details, but said "I don’t think it will hurt them [some industries] if they pay taxes to the government."
Industry officials earlier said removing tax perks granted to major sectors will make the country less attractive than neighbors that are offering either the same or even better incentives.
Reports earlier said the Board of Investments is proposing to limit the granting of tax incentives to six priority sectors, namely: agriculture and agribusiness, infrastructure, tourism, engineered products, research and development, as well as strategic investments. The government earlier identified 12 sectors eligible for perks.
Mr. Favila hinted that the telecommunications and automotive sectors are likely to keep their perks, but declined to elaborate. "It’s still being worked out. I’ll try to have it done by April," he said.
Not the only game in town
Semiconductors and Electronics Industries in the Philippines, Inc. President Ernesto B. Santiago said a proposal to scrap the electronics sector from a list of industries eligible for fiscal incentives would discourage prospective investors.
"Taking out what you have been giving before is not good. If you want to make the Philippines a smart choice for doing business, you should not be doing that. The government may have made studies on that already and found out that it’s no longer necessary for the electronics sector — but on the premise of taking away what you usually give, that is not good. It’s better for electronics to still be included," he said.
Ramon R. Isberto, Smart Communications, Inc., Public Affairs Group Head, said eventhough the industry was included in the 2007 Investment Priorities Plan, it was not able to take advantage of any perks, particularly for projects involving 3G networks.
"We were applying before, but we were not granted. We already experienced this impact. Maybe the government thought investments are no longer needed but all businesses would like to benefit from incentives," he said.
He stressed the country’s Southeast Asian neighbors have been increasing incentives or at least maintaining their incentives program while the Philippines is heading in the "opposite direction."
"We are competing with these countries for international capital. Removing incentives just makes the country less attractive...we’re not the only game in town. The result could be...some investments will simply not be made," Mr. Isberto said.
The Department of Trade and Industry and the Department of Finance have long held opposing views on the granting of perks to investors.
The Finance department, which earlier proposed the phaseout of the ITH within three years, had suggested the replacement of the incentive with alternatives like a lower corporate tax rate, double deduction for training, research and development, net operating loss carryover and accelerated depreciation of equipment.
The Trade department, on the other hand, wants to lengthen the period of ITH availment.
The Finance department, citing studies, has constantly argued that the ITH is the most redundant of fiscal incentives, meaning that investments would still be made even without it.
But the Trade department counters that the ITH should be retained and its period prolonged to compensate for the country’s weaknesses in other basicfactors that investors consider. — Bernardette S. Sto. Domingo
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