Philippines based exporters want the government to allow garment and textile makers to keep their tax incentives, saying such will be crucial in getting multinationals fleeing the trade conflict to relocate to the Philippines. Foreign Buyers Association of the Philippines President Robert M Young said the second tax reform package should retain incentives for garment manufacturers to help them in their efforts to revive their industry. As such, the measure should contain provisions securing tax breaks and exemptions for investors in the garments industry.
He said the package should be different from the Tax Reform for Attracting Better and High Quality Opportunities (Trabaho) bill in the 17th Congress, which proposed the reduction of the country’s corporate income tax (CIT) rate at the expense of incentives granted to economic zone firms.
“[The second tax reform package should be] unlike the Trabaho bill that investors are surprised [and] compromised with new tax amendments and schemes. Similarly, with the export tax credit [and] refund, which suddenly was suspended [under the Trabaho bill],” Young said in a statement.
Young, who is also the trustee for the textile, yarn and fabric sector of the Philippine Exporters Confederation Inc., argued that the country’s investment package should be comprehensive enough to serve as a magnet for the transfer of import orders, as the trade conflict between the United States and China hurts multinational businesses.
“We have benefitted only in a very small scale, the reason being that the Philippines is not ready. We lack competent manufacturers and locally milled textile plus required accessories,” Young explained. The Philippines catered to only 10 percent of the relocated garment orders from China, as most of the orders went to manufacturing powerhouse Vietnam, according to the export leader.
To revive the industry, Young said the government should provide more—and not reduce—tax perks for garment manufacturers, such as reducing the 12- percent value-added tax, granting a special concession power rate and providing incentives to compensate labour rate differential. The government can also extend the duty-free importation of textile machinery and equipment and regulate technical importation to assist industry players.
Young also asked the Department of Science and Technology (DOST) to sponsor a technology course on garments and textile in line with changes brought about by the Fourth Industrial Revolution. Shipments of articles of apparel and clothing accessories as of June declined 8.7 percent to $434.57 mn, from $476.02 mn during the same period last year, according to data from the Philippine Statistics Authority (PSA). Last year, exports of apparel and clothing fell 11.33 percent to $974.44 mn, from $1.09 bn in 2017. Exporters, especially those operating in economic zones, are asking the government to give up its plan to rationalize incentives, particularly the 5-percent tax on gross income paid in lieu of all local and national taxes.