European companies threatened to leave the country if the second tax reform package will be passed. The threat was issued last Friday when news broke about a Palace order suspending negotiations for aid with countries that backed a United Nations (UN) resolution seeking to probe the human rights situation in the country.
The European Chamber of Commerce of the Philippines (ECCP) expressed pessimism on the Corporate Income Tax and Incentive Rationalization Act (CITIRA) or the second phase of the government’s comprehensive tax reform package and said its “member-locators at the Philippine Economic Zone Authority (PEZA) like the Mactan Economic Zone (MEZ) in Lapu-Lapu City, Cebu” are reviewing their options.
Palace spokesman Salvador Panelo, however, said relations with European firms remain “business as usual.”
ECCP executive director Florian Gottein estimated that about 1.5 million jobs up to the sari-sari store level will be affected by CITIRA.
“There were some member-locators of ECCP that may redirect their businesses especially to Vietnam because of the CITIRA law,” he disclosed.
He expressed hopes that legislators will consider consolidated proposals of the different foreign trade groups on some provisions of the CITIRA law.
Malacañang, however, dismissed reports (not in the Daily Tribune) that the Office of the President had ordered the suspension of all negotiations on loan agreements and grants with the signatories of the UN resolution drafted by Iceland.
No such order
Palace spokesman Salvador Panelo said no such instruction came from Mr. Duterte or any other official from the Palace.
“The President has not issued a memorandum suspending loans and negotiations involving 18 countries that voted in favor of the Iceland resolution,” Panelo clarified via text message to reporters last Friday evening.
“Not true. Just talked to PRRD (President Rodrigo Roa Duterte),” he added.
The supposedly “confidential memo” issued by the Palace directed all “Department Secretaries and Heads of Agencies, Government-Owned or Controlled Corporations (GOCC) and Government Financial Institutions (GFI)” to renege from deals made with “the governments of the countries that co-sponsored and/or voted in favor of the aforesaid resolution, pending the assessment of our relations with these countries.”
A copy of the said memo that circulated online showed the document as having been signed by Executive Secretary Salvador Medialdea “by order of the President.”
To recall, last July a minority in the UN Human Rights Council comprised of Argentina, Austria, Australia, Bahamas, Bulgaria, Croatia, Czech Republic, Denmark, Fiji, Italy, Peru, Mexico, Slovakia, Spain, Ukraine, the United Kingdom, including Northern Ireland, and Uruguay — greenlighted the proposal of Iceland for the body to probe the alleged human rights abuses in the country in connection with the Duterte administration’s unrelenting campaign against narcotics.
The Philippine government slammed the UNHRC for adopting the resolution with Malacañang tagging it as “grotesquely one-sided,” “based on unverified facts and figures,” and “an affront” to the country’s sovereignty.
Mr. Duterte also did not mince words on the issue and said that he “would rather go to hell” than be put behind bars because of his administration’s war on illegal drugs.
“I have so many cases filed against me because of drugs. But I’m telling you, I will drag them all to hell with me before they can put me in jail,” the President said in one of his previous public engagements.
MEZ deputy zone administrator lawyer Ruperto Rufino San Juan, confirmed many locators, including Europeans in MEZ 1 and 2 and the Cebu Light Industrial Project, all in Lapu-Lapu City, feared the implementation of the CITIRA law where tax holidays among PEZA-registered foreign and local companies will be reduced, if not taken away.
Under CITIRA, corporate income tax rate will be reduced from 30 percent to 20 percent for almost one million businesses, while rationalizing incentives for some 4,100 firms that pay only five percent in tax after enjoying a tax holiday.
One of the tax incentives of PEZA-registered companies is exemption from value added tax.
CITIRA is projected to create 1,566 million jobs and attain an annual incremental gross domestic product (GDP) growth of 3.6 percent.
Free zones like Subic and Clark will retain their duty-free status without value added tax levy for exports.
With Kristina Maralit and Elmer N. Manuel