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1,200 companies to pullout if TRAIN 2 is passed, Drilon warns

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By Hannah Torregoza

Senate Minority Leader Franklin Drilon warned that Philippine direct investments and employment would be in jeopardy if the second package of the Tax Reform for Acceleration and Inclusion (TRAIN) law pushes through.

Senate President Franklin Drilon (Jacqueline Hernandez | Manila Bulletin File Photo)

Senate President Franklin Drilon (Jacqueline Hernandez | Manila Bulletin File Photo)

According to Drilon, at least 1,200 companies are poised to leave the country while a good number of investors have expressed apprehension about investing in the Philippines if fiscal incentives are removed under the government’s proposed second package of tax reforms.

The minority chief made the revelation during the interpellation of the budget of the Department of Trade and Industry (DTI) late Tuesday.

“At least 1,200 enterprises might leave the country due to a sudden shift in the policy, which would cut the incentives given to foreign investors,” Drilon said.

He also said the country stands to lose about 150,000 jobs generated through the grant of incentives by the country’s top investment promoting agencies, namely the Board of Investment (BOI) and Philippine Economic Zone Authority (PEZA), if the second package of the TRAIN law is implemented.

“All of these will be in jeopardy once the TRAIN 2 is passed,” Drilon said.

“I see a very dark future insofar as the foreign direct investments are concerned. We will not be surprised if next year, we will still be kulelat(cellar dweller) again because of the lack of correct policy,” Drilon warned.

Incentive-driven

The second package of the TRAIN law seeks to lower the corporate income tax paid by some 95 percent of businesses while at the same time, retaining and providing new fiscal incentives for deserving recipients.

But senators, both in the majority and the minority bloc, have reservations over TRAIN 2, particularly since the Department of Finance (DOF) seems bent on shortening the period of incentives given and the fact that many Filipinos stand to lose their jobs.

Drilon noted the government is relying heavily on incentives to attract investors. This new policy being pushed by the economic managers does not sit well with companies currently enjoying these incentives, which would make them think twice about expanding their business if the incentives are removed, he further said.

“We have established that the principal tool for attracting foreign direct investments (FDIs) to come to our shores is the incentives granted under the law,” Drilon said.

“However, it is not consistent with the reduction of fiscal incentives granted by investment promoting agencies to registered foreign companies, which the government is proposing under TRAIN 2,” said Drilon.

“How do we reconcile these two conflicting policies?” he pointed out.

“The conclusion that we can draw from these debates is that there is no deliberate and clear path to attract more FDIs, because the only tool that we have is incentives. Now, this grant of incentives is being muddled by these debates on TRAIN 2,” Drilon stressed during the interpellation.

Drilon, likewise, urged the DTI to adopt measures to improve the export industry, citing its contribution to the country’s gross international receipts, noting the Philippines has a poor performance in the export industry and is lagging behind its Southeast Asia neighbors.

In 2017, the export in Singapore was at a staggering $373-billion, Indonesia at $169-billion, Thailand at $237-billion, Malaysia at $218-billion, and Vietnam $215-billion.

The Philippine exports pale in comparison at $69-billion.

“We are kulelat (at the bottom). We are sixth in terms of export performance in Southeast Asia and we are even overtaken by Vietnam,” Drilon said.

“We are lagging behind and we are not improving at all, notwithstanding all the programs that we have,” he noted.

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