Japanese wary of tax reforms
Japanese investors on Thursday expressed concern over the government’s tax reform program which may remove the incentives given by the Philippine Economic Zone Authority to investors.
Japanese Chamber of Commerce of the Philippines president Hiroshi Shirashi said Japan was the Philippines’ single biggest source of foreign direct investments as of end-2016 at $12.4 billion, followed by the Netherlands with $9.4 billion and the US with $8.4 billion.
“We support the tax reform but we also wish to maintain the Peza incentives. That is important,” Shirashi told reporters at the sidelines of the 43rd Philippine Business Conference at Manila Hotel.
He said the tax reform program “may affect the Philippines’ core competence” especially if incentives given to economic zone locators would be recalled or diluted.
The Japanese group said the tax reform program would not only create implications over value added tax and corporate income tax, but could also affect Peza incentives. “The Peza incentive is a very strong competence of the Philippines than other Asean countries,” it said.
JCCP said while Japan was already the Philippines’ largest source of foreign investments, there was still room for growth.
It noted that among Asean countries, the Philippines received the least FDIs from Japan in the first five months of 2017, with only $561 million.
The group said that in the same period, Singapore received $1.95 billion worth of FDIs from Japan; Thailand, $1.3 billion; Indonesia, $1.095 billion; and Vietnam, $856 million.
One advantage of the Philippines, the group said, is the competitive labor cost. It said wages in the Philippines were already comparable with Vietnam, where the rates were increasing faster.
Another factor that may continue to attract investments from Japan is the further liberalization of foreign equity investment in some industries, it said.
Shirashi said the open policy and easing of foreign equity restrictions could become additional attraction to capture a new growth momentum. He said the promotion of partnership between the Philippines and Japan’s small and medium enterprises could support further inflows.
Shirashi said Japanese companies were optimistic about doing business in the Philippines, as the country ranks number one in terms of profit expectation.
Data from the Japan Trade External Organization showed that 77.7 percent of Japanese firms operating in the Philippines were expecting a profitable return of investments, the highest in Asia.
Meanwhile, the Philippine Chamber of Commerce and Industry, organizer of the 43rd Philippine Business and Conference 2017, prepared a set of resolutions on agriculture, education, energy and power, environment, industry development, legislative, SME development and transportation and logistics for consideration of the Duterte Administration.
PCCI said the list of resolutions was imperative for the continued growth of the economy as this would benefit micro, small and medium enterprises that comprise 99 percent of businesses.
The group requested the Agriculture and Trade Departments to fully implement the Agribusiness Support for Promotion and Investment in Regional Expo nationwide by identifying the priority commodities of the regions, creating database and market profiling as well as a centralized monitoring mechanism that would document compliance and accomplishment of Aspire deliverables.
It also urged the national government and Education Department to strengthen health and nutrition program in public elementary schools and give more impetus to the K-12 Program.
It asked the Energy Department and the Malampaya Gas Service Contractors to uphold sanctity of contracts and encourage investments. It requested the Energy Regulatory Commission to expedite the decision on eight power supply agreements still pending with the commission.
On industry development, the group requested for the immediate approval of Presidential Proclamation of economic zone applications to create more economic opportunities especially in the regions.