Ecozone locators express fears on TRAIN 2 impact

Locators firm Mactan Export Processing Zone (MEPZ) expressed fears of the drastic effect of TRAIN 2 to their businesses.

During the second day of the Philippine Institute of Certified Public Accountant (PICPA) Summit yesterday held at Marco Polo Plaza Cebu, Jonathan Pasana, director of Shared Services TMX Phils.,Inc., said that if the second tranche of the tax reform will not reconsider the modernizing of incentives, locators might consider transferring operations to other countries.

Pasana, who relayed the sentiments of the members of MEPZ Chamber of Exporters and Manufacturers (MEPZCEM) stressing that what seems to be problem right now is that companies might opt to close or relocate their operations to other countries with cheaper cost of doing business.

The Tax Reform Acceleration and Inclusion (Train-2) seeks to rationalize fiscal incentives and reduce corporate income tax rates gradually to no less than 25 percent from 30 percent.

On the other hand, amid the threats of losing investors in economic zones because of the tax reforms, Department of Finance (DOF) undersecretary Karl Kendrick T. Chua appealed to economic zone locators to look at the reform in a much broader perspective, as it meant to balance the country’s economic strength.

“Let’s look at the whole package [tax reforms] in a bigger picture. Not only in the industry-centric perspective,” explained Chua who is the chief economist and undersecretary for the proposed Strategy, Economics, and Results Group of the DOF.

“We have to be prudent. No money comes from heaven for free. We want to have better balance,” Chua said adding that if reform should be implemented right now, the Philippines will continue to suffer from sunset condition.

Chua mentioned that in 2015, the Philippine government gave away fiscal incentives to over 3000 firms. While the more than 700,000 Small and Medium Enterprises (SMEs) are paying regular taxes. “They are [SMEs] also working very hard.”

All reforms are difficult, otherwise it will not be called a reform if it were easy, Chua reminded PICPA delegates, reiterating that changes have been pushed in order for the country to move forward and achieve its right economic potential.

Already submitted to the House of Representative early this year, the TRAIN-2 package will introduce a modified tax incentives for companies to make these ‘performance-based, targeted, timebound, and transparent, she further explained.