FPI warns on OECD-aligned tax reform risks

The Federation of Philippine Industries (FPI) urged policymakers to take a cautious approach to tax reforms aligned with proposals from the Organisation for Economic Co-operation and Development (OECD), warning that changes must not weaken demand or reduce the country’s investment appeal.

On the proposal to broaden the value-added tax (VAT) base, FPI said removing exemptions for senior citizens, schools, and hospitals could raise costs in sensitive sectors and dampen household spending if not properly phased.

“Any abrupt changes could ripple through households and, at the margins, labor markets, affecting employment and service access. Safeguards are essential, and we must be sensitive to the effects of these changes,” said FPI chairperson Beth Lee.

The group also supported linking tax incentives to actual investment activity but cautioned against moving away from tax holidays without careful planning, noting that ASEAN neighbors continue to offer competitive fiscal packages.

“Moving away from tax holidays, if and when it is implemented, must be carefully sequenced and regionally benchmarked to ensure reforms strengthen—rather than erode—the country’s investment appeal,” Lee said.

“The success of fiscal reforms will hinge on careful sequencing—implemented at the right pace, in the right order, to preserve demand, sustain investor confidence, and support industrial expansion. The effects must be carefully assessed,” she added.

FPI said incentive reforms should be paired with measures to improve competitiveness, including lower logistics and power costs, better infrastructure, and productivity improvements.