June 23, 2018, 5:54 am
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SEIPI bears higher cost with TRAIN

The Semiconductor and Electronics Industries of the Philippines Inc. (SEIPI) yesterday warned the proposal to slap a 15-percent corporate income tax (CIT) rate on net income on the sector would make their cost 40 percent more expensive, dragging further the competitiveness of the Philippines versus its competitors in the region.

Dan Lachica, SEIPI president, said the industry supports the Department of Finance’s (DOF) Tax Reform for Acceleration and Inclusion where it plans to cut the CIT rate from 30 percent to 15 percent. This means SEIPI members which are predominantly exporters will lose a very important incentive, a  5 percent preferential tax rate on gross income earned (GIE). 

The group offered a compromise rate to the DOF, a 10-percent rate inclusive of all other taxes like local government and real property taxes. 

Lachica said at that rate, industry would still incur higher costs but that it is something SEIPI members find acceptable as an “investment” for infrastructure.

At present, aside from the preferential 5 percent GIE tax rate, electronics exporters enjoy income tax holiday (ITH)  at the start of their operations.  About 2  percent of the 5 percent GIE tax  goes to local government units (LGUs) hosting the companies. 

The group said the imposition of tax on equipment attached to real property would translate to millions of pesos in taxes that would disrupt their cost structure and competitiveness.

Lachica noted the importance of the Philippines retaining or even improving its competitiveness in attracting investments  for technology-driven electronics industry. 

“If expansion does not happen here, we will be stuck with legacy products. Some (SEIPI members) are expanding... but we want (more) new products. We cannot be stuck because (in the future, there won’t be any) more use (for these products and) the factories (that produce them) will shut down,” he said.

According to Lachica, SEIPI had suggested to the DOF to look at other countries in determining the incentives.

“We have to be competitive,” said Lachica, citing Vietnam which is practically “sucking” all investments because of its attractive incentives, low labor and power costs.

SEIPI said Vietnam’s zero-rent for50 years and Thailand’s 15-year ITH will be hard to compete against if all other components of operating costs—power, labor, logistics—are higher in the Philippines.

The group is also seeking clarification on what defines “new products or new technology ” where investments will be given incentives.

“For us a new product is about performance, speed, cost and better quality and not just shape,” Lachica said.

SEIPI noted that as its members deal with a  lot of agencies and LGUs, they are exposed with to a “lot of inconsistencies and inefficiencies because of the different practices and to a certain extent corruption.”

Lachica noted SEIPI member-companies right now deal with a lot with agencies and would rather that they transact with one, like the one-stop shop operations of the Philippine Economic Zone Authority
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