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DTI seeking fiscal incentives for relocating firms, worker retention

dti seeking fiscal incentives for relocating firms worker retention 816x445 - DTI seeking fiscal incentives for relocating firms, worker retention

By Jenina P. Ibañez, Reporter

THE Department of Trade and Industry (DTI) has proposed fiscal incentives for companies to retain employment and relocate to the provinces, addressing areas not tackled by the Bayanihan II stimulus bills now being harmonized in bicameral conference sessions.

Bayanihan II is known formally as the proposed Bayanihan to Recover as One Act.

In a letter dated Aug. 9 to Deputy Speaker Raneo E. Abu, a member of the bicameral conference committee, Trade Secretary Ramon M. Lopez asked that certain businesses be allowed to register as eligible for incentives under Executive Order 226.

Under this order, businesses in preferred areas are given incentives such as income tax holidays, a deduction of taxable income equivalent to 50% of wages, and tax exemptions on imported capital equipment if they meet certain requirements.

The DTI is asking that incentives be applied to manufacturers relocating to the Philippines, businesses that retain 90% of their employees during the pandemic, and new outsourcing projects that start in 2020 or 2021 or employ returning overseas Filipino and displaced workers.

They are also asking to apply this to certain business activities outside the capital and agri-industry or businesses that source from marginalized communities.

For corporate taxpayers that retain 90% of their workforce up to 2021, the DTI said the net operating loss for tax years 2020 and 2021 that had not been offset as a deduction from gross income should be carried over as a deduction from gross income for the six consecutive tax years after the loss.

The DTI said that the companies should get a year of income tax holiday in the first year of positive income after 2021.

The department is also asking that businesses retaining their workforce at government-owned freeport, export, and industrial zones be given a reprieve from lease payments.

MANUFACTURING AND CONSTRUCTION SUPPORT
The department is requesting P50 million to support its COVID-19 (coronavirus disease 2019) response for the industrial sector.

This includes P30 million for COVID-19 testing for small and medium-sized construction companies working on public infrastructure, P15 million for a testing laboratory for personal protective equipment for domestic manufacturing firms, and P5 million for the testing and quarantine of prospective foreign investors entering the country.

The proposals include relaxing the travel ban for foreign investors.

Mr. Lopez said that Bayanihan II had left out the manufacturing and construction sectors, which experienced declines in demand and productivity.

“Our competitors have largely insulated their manufacturing sectors from lockdowns and, by now, have even relative success in containing the COVID-19 pandemic. In spite of their success so far, they are implementing substantially more generous stimulus and subsidy/incentive packages,” he said.

“As our neighbor-competitors, however, still do experience depressed demand, their heavily-subsidized manufactured and tradeable products will look for markets elsewhere and the Philippines’ large population base, continuous government spending, and zero-duty for imported products, is an important target market.”

Electronics exporters supported Mr. Lopez’s proposal, which they said would prevent the shut down of companies and displacement of workers in the manufacturing sector.

Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) President Danilo C. Lachica in a letter to Senate President Vicente C. Sotto on Aug. 12 said that the industry is expecting a contraction from its 2019 export levels.

“This may conceivably get worse if we don’t arrest the infection rate,” he said.

Mr. Lopez is also asking for authorization to amend tariffs even as Congress is in session to raise government revenues.

The department also batted for government preferential treatment in procurement for domestic suppliers.

“Government expenditure to effectively stimulate the economy should create demand for domestic manufacturers,” Mr. Lopez said.

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