By Jenina P. Ibañez, Reporter
AN ELECTRONICS exporters industry group is asking lawmakers to reconsider the potential cap on investments reviewed by investment promotions agencies (IPA).
Under Senate Bill 1357 or the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, IPAs like the Philippine Economic Zone Authority will review investment projects valued at P1 billion or lower, while the Fiscal Incentives Review Board (FIRB) approves larger projects.
Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) President Danilo C. Lachica said that the industry group is hoping for a higher threshold for quicker approval processes under the IPAs.
“We will send our inputs to the House of Representatives. Many investments are over the P1-billion cap. Majority will be at or below P5 billion,” he said in a mobile message on Monday.
The Bicameral Conference Committee is set to be convened to reconcile clashing provisions in the bills passed by the House and Senate. The Senate passed its version in November 2020, while the House approved its version in 2019.
The Senate version would reduce corporate income tax to 25% from 30% starting July 2020, and then by one percentage point each year from 2023 to 2027. The rate falls to 20% for local smaller companies with net taxable income of P5 million or lower and total assets less than P100 million.
It would also strengthen the capacity of the FIRB to oversee the grant of incentives by IPAs.
“Historically, expansions and new investments have been around $100 million or roughly about P5 billion, so we’re hoping to approach that number so that you can have more efficient and quick approval,” Mr. Lachica said in an interview with ANC on Monday.
He added that he “would like to understand further” the timeline and criteria for renewal applications for existing projects.
“How long will it take and is the FIRB properly equipped to address those in an expeditious manner?”
Policy think tank Action for Economic Reforms last year said that increasing the threshold would weaken tax reform by removing investments from scrutiny, adding that the Bicameral Conference Committee could not legally insert the proposed amendment.
House Committee on Ways and Means and Albay Rep. Chairman Jose Maria Clemente S. Salceda, the principal author of the House version, in a phone interview said that the SEIPI recommendation “will be on the table.”
“Naka-pitong pre-bicam na kami (We have had seven pre-bicam meetings) and it’s too long, it’s too complicated but definitely it will get attention,” he said.
The industry group expects 7% growth for 2021 with more global demand for industrial, consumer, mobility, and medical electronics, after a projected 5% decline for 2020.
Meanwhile, the Philippine Stock Exchange, Inc. (PSE) and the Philippine Dealing System Holdings Corp. (PDSHC) in a joint statement asked for the immediate enactment of CREATE, which they said would make the country’s tax rates more competitive in the Association of Southeast Asian Nations (ASEAN) region.
They added that the reduction in corporate income tax will benefit the Philippine economy as it leaves more funds for publicly listed companies to expand business or distribute to stockholders.
“The investment of said tax savings in other business undertakings or investment vehicles can set off a chain of positive economic consequences such as employment generation, higher spending, and increased domestic business activity,” the PSE and PDSHC said.