Foreign Chamber Comments on TRABAHO

Leading business associations in the Philippines are supporting the TRABAHO bill in the Congress but urge that it contain provisions that continue to support the country’s competitiveness. These provisions include the following:

1. Reduces the Corporate Income Tax (CIT) to 20% at 1% – or faster – annually commencing in 2019, with annual reductions in CIT set at this percentage independent of any other measure. This is very important to make the Philippines a more attractive investment destination in ASEAN, as other members have much lower rates.
2. Provides increased tax revenue by ending fiscal incentives for domestic firms that benefit from special laws granting incentives, when their continuation no longer provides useful social benefits, such as lower electricity prices, lower air fares, renewable energy development, education, hospitals, and the like.
3. Provides increased tax revenue by greatly improving tax collection efficiency from over 900,000 corporations in the country through digital and other reforms.
4. Continues competitive investor-friendly policies that have created major drivers of the economy and massive job creation over the last few decades. In particular, PEZA accounted for 64% of total Philippine exports of commodities valued at US$40 billion in 2017. Business processing generated over $25 billion in revenue in 2017.  Together they employed over 1.4 million direct and over 7 million Filipinos indirectly.
5. Protects exporters of goods and services that have chosen to locate in the Philippines because of the country’s quality workforce but can also relocate to competitor economies.
6. Preserves the “one-stop shop” of the Philippine Economic Zone Authority and other ecozones, where investors deal only with the national government, which shares a percentage of CIT with LGUs. Such arrangements are similar to industrial estates in competing countries in Asia.
7. Ends “perpetual” incentives in no less than 10 years to coincide with the new 20% CIT rate. New efficiency-seeking investors (mostly in PEZA zones, ecozones, and ROHQs) need time to adjust to the higher CIT. However, grandfathering pre-TRAIN contracts between PEZA and investors and for ROHQs is preferred to avoid impairment of contracts and possible lawsuits against the government.
8. Preserves zero-VAT rating for exporters and their local suppliers of goods and services. This encourages purchases from local suppliers instead of imports, supports job for Filipinos, and is in line with the Ease of Doing Business policy.

Seven foreign chambers of commerce in the Philippines endorse this paper, including (1) the American, (2) Australian New Zealand, (3) Canadian, (4) European, (5) Japanese, (6) Korean, and (7) Philippine Association of Multinational Regional Headquarters (PAMURI).