Philippines: Trade dep’t makes pitch for TRABAHO bill incentive retention

• THE DEPARTMENT of Trade and Industry (DTI) is hoping to reach a compromise with the Department of Finance (DoF) on provisions of the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) Bill, which seeks to rationalize investment incentives.
• A document obtained by reporters last week represented the minutes of an 18 Oct 18 meeting of the DTI’s Board of Investments (BoI) with the DoF.
• One of the adjustments DTI offered for the proposed legislation was lengthening the domestic input expense incentive to five years after the expiry of income tax holiday, as a sweetener for exporters sourcing their raw materials locally.
• The minutes indicate that a lack of raw materials and intermediate parts and components represents “a major gap” for most industries and incentives “have an important part to play in addressing the issue of missing markets.”
• “Without addressing the market failure, the Philippines might not be able to grow and develop new and high value-added exports which put the country at risk of incurring higher trade deficits in the near future,” it added.
• Other tweaks sought by the DTI to strengthen the value chain include the maintenance of value-added zero-rating for indirect and constructive exporters regardless of location; the reduction of the threshold to exempt an exporter from VAT to 70% exports from the proposed 90%; and the exemption of ecozone-registered projects from import duties similar to the arrangements at freeports.
• Other incentive-focused proposals include stretching the income tax holiday to five years from the current proposal of three years. It also suggested deleting the references on research and development; deduction on additional labor expense; and domestic input expenses.
• Trade secretary Ramon Lopez said that the negotiations with the DoF hope to yield a “common position” when both departments present to the Senate.
• The minutes of the meeting between the DTI and the DoF also indicate that the former sought to retain the arrangement for direct remittances to local government units (LGUs) of corporate income tax to maintain the “one stop” nature of ecozones, whose locators value the relative lack of dealings with other government agencies. However, there was no mention of the exact share that LGUs should be given from the CIT.
• At present, 2% of the 5% gross income earned (GIE) tax incentive enjoyed by locators of the Philippine Economic Zone Authority is channeled to LGUs.
• The BoI also sought the removal of the provision that gives the DoF the sole power to interpret the provision of the proposed bill.

External Link: https://www.bworldonline.com/trade-dept-makes-pitch-for-trabaho-bill-incentive-retention/

External Link: https://www.philstar.com/business/2018/10/29/1863971/dti-proposing-changes-trabaho-bill