By HENRY EMPEÑO |

SUBIC BAY FREEPORT — Officials and business executives here are pressing for a compromise that would satisfy both the government and investor-companies in the Subic Bay Freeport under the proposed Tax Reform for Attracting Better and High-Quality Opportunities, or ‘Trabaho’ bill.

In two separate consultations with Trade Assistant Secretary Rafaelita Aldaba last week, senior officials of major investor-companies here expressed concern over perceived ill effects of the proposed law and urged the government to either reconsider the scrapping of the five-percent tax on gross income earned (GIE) or provide for a longer transition to a performance-based tax incentives system.

In both occasions, Subic Bay Metropolitan Authority (SBMA) Chairman and Administrator Wilma T. Eisma said there should be a win-win solution to protect investors who bring in value to the Philippine economy.

“We have to study ways on how we can retain companies not only because of their innovations, but also in consideration of their employment generation and the capacity to transfer skills to local workers,” Eisma said.

Noting the Trabaho thrust to apply incentives uniformly across all investment promotion agencies (IPAs) in the country, Eisma said that while this “would ultimately separate the grain from the chaff” among existing investors here, it might hurt high-value companies in the interim.

“Perhaps we can come up with more criteria for the incentives scheme where (desired) investors could fit it,” she added.

The Trabaho bill, which is a substitute to the second package of the Tax Reform for Acceleration and Inclusion (TRAIN) Law that the Duterte administration wants to implement, is geared toward modernizing fiscal incentives for corporate investments in the country and generating more employment.

The bill has already gained approval at the House of Representatives on September 10.

However, investors in Subic are wary over provisions that would effectively hike the existing 5% GIE tax to as much as 20% in corporate income tax (CIT) if they did not qualify for the government’s Strategic Investment Priorities Plan (SIPP).

They are also unhappy over the burden of having to pay real property tax under the proposed law for the land they now occupy.

A legal consultant of Hanjin Heavy Industries Corp.-Phils., which occupies some 300 hectares of land for its Subic shipbuilding operations, said the company “would be bleeding cash” under the new tax measure.

Hanjin, which has made the Philippines the fourth biggest shipbuilder in the world today, employs some 32,000 workers during peak production period.

On the other hand, Donald Galacgac, finance manager of Japanese servo-motors manufacturer Sanyo Denki Phils., said they have run financial simulations under the Trabaho tax scheme and got dismal results.

He added the company’s board of directors has already decided for the firm to move out instead of losing money under a new tax scheme. Sanyo Denki employs 1,200 workers.

Danny Piano, president of the Subic Bay Freeport Chamber of Commerce, meanwhile told Aldaba that the two-year transition period provided in the House version of the Trabaho bill would prove difficult to hurdle. He said a 10-year transition period from the 5% GIE to a 20% CIT would be “more acceptable.”

“There are also unintended consequences of the Trabaho bill, because when you remove the 5% tax, you also remove the LGU shares,” he said, referring to the funds given by the SBMA to local government units affected by Subic Freeport operations.

Under RA 7227, or the Bases Conversion and Development Law of 1992, two percent of the 5% corporate tax paid by Subic Bay Freeport-registered companies goes to LGU shares. The SBMA has released some P1.65 billion in LGU shares since 2010.

Despite the pall of doom cast by the new bill, Aldaba said the Department of Trade and Industry (DTI) would try to influence the Department of Finance (DOF) “to soften its stance” on the Trabaho bill.

“We are all pro-manufacturing,” Aldaba asserted. “We are your partners in creating more and better jobs.”

She added that business establishments in Subic should come up with innovations and new products and processes that would qualify them for incentives granted by the government.

“I was alarmed by the news that several companies would leave if the Trabaho bill is passed. We wouldn’t like you to leave just because a law is under discussion,” she added.

The DOF had reportedly proposed tougher amendments to the bill, pointing out that the gradual lowering of CIT would far outweigh the rationalization of incentives for investors.

Still, Aldaba said there could be a compromise version for the consideration of the Senate. “We would like to introduce changes in the Senate version, so we’re encouraging you to raise the issues because what I gather here, we will try to incorporate these in our recommendation,” she added.

“We will make sure that all the necessary measures will be taken to make you stay,” she assured investors here.

For her part, Chairman Eisma said the SBMA will seek the help of lawmakers, particularly Senator Richard Gordon, who was the first SBMA chairman, to ensure the protection of Subic investors.

PHOTOS:

[1] SBMA Chairman and Administrator Wilma T. Eisma proposes presses for a compromise solution to ease fears by investors at the Subic Bay Freeport over the effects of ‘Trabaho’ bill.

 

[2] Trade Asst. Secretary Rafaelita Aldaba explains to Subic business locators the provisions of the proposed ‘Trabaho’ bill, saying innovations would qualify investors for incentives