THE electronics industry said it is lobbying for lower tax rates on gross income earned (GIE) as well as perpetual entitlement to this incentive for exporters, both of which would represent a more generous tax treatment than the GIE incentives proposed in a pending tax reform bill.
In a revised position paper sent to reporters Monday, the Semiconductor and Electronics Industries in the Philippines Foundation, Inc. (SEIPI) said that it supports the Senate version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA) with its preferred GIE terms.
CITIRA legislation proposes to gradually lower corporate tax rates while rationalizing incentives. The Senate version of the bill is pending, after the House passed its measure last year.
“We are still concerned that moving forward with this version will have detrimental effects on our electronics industry, investments and employment, as a result,” SEIPI said in the statement.
SEIPI said it is seeking a perpetual tax of 7% on GIE in lieu of all taxes for export enterprises instead of the time-bound concessional tax rates in the Senate bill.
SEIPI had been asking for an extended transition period of 7-10 years for holders of current incentives, after a four-year income tax holiday, for a total of up to 14 years.
Senate Bill No. 1357 sponsored by Senator Pilar Juliana S. Cayetano grants an income tax holiday of two to four years. After this, companies pay a special corporate income tax of 8% this year, 9% in 2021, and 10% in 2022 based on GIE, in lieu of national and local taxes.
Companies currently enjoy a four to-six year income tax holiday, after which they pay 5% GIE.
The bill proposes a two to seven-year transition period for companies that already avail of the 5% GIE.
Ten business groups and professional organizations, including the Management Association of the Philippines and the Makati Business Club, last week expressed their support for the current version of the bill.
Marie Genevieve L. Bautista, SEIPI Industry Analyst, said in a phone interview that a longer transition period would soften the blow for SEIPI companies because of the increased tax rate.
She said Vietnam offers a 16-year period for investors to enjoy incentives.
“Our companies are efficiency seekers so it’s actually quite easy for them to transfer to Vietnam if they choose to.”
She said the perpetual tax of 7% on GIE follows the lead of proposals made by Senator Ralph G. Recto last week.
Ms. Bautista added that SEIPI plans to submit its revised position paper to the Senate this week.
SEIPI also asked to change the terms of eligibility for a seven-year transition period, lowering the export threshold norm to 90% from 100%.
“Not all of our companies are at 100% export sales. Some are at 93%-95%. Although we understand that this provision is to encourage exports, these companies who service the domestic market pay regular Corporate Income Tax (CIT) on their domestic activities,” Ms. Bautista said. — Jenina P. Ibañez