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Electronics sector expects exports to rise 6% to $35b

The semiconductor and electronics sector expects exports to increase 6 percent this year to a record $35 billion from $32.7 billion in 2017.

“It will still be a record year for us but the threat of having onboard a legislative measure that can impact on our productivity and profitability may affect our performance next year,” Semiconductor and Electronics Industry of the Philippines Inc. president Dan Lachica said in a news briefing Thursday.

Lachica was referring to House Bill 8083, or the proposed Tax Reform for Acceleration and Inclusion bill, that aims to reduce the income tax rate from 30 percent to 20 percent while removing the incentives enjoyed by companies.

Lachica said the bill would likely diminish the growth of the semiconductor industry.

Electronics exports reached $3.41 billion in September, comprising 58.58 percent of the total merchandise exports.

The industry said $1 billion worth of planned expansion of electronics firm were diverted to other markets amid concerns by foreign investors over the proposed Trabaho bill.

Lachica said at least four companies already moved out carrying with them billions of dollars worth of expansion investments.

“You’ve seen the reduction in foreign direct investments particularly those at Peza [Philippine Economic Zone Authority].  If fact we have member companies [that] have redirected investments from the Philippines to other countries. It’s gonna eventually translate to jobs being at risk. Because the nature of our industry is that technology moves really fast so the factories  here have to be given new product, new technologies. And these come with expansions. But if the expansions don’t happen here, we will be stopped from producing legacy products, which overtime will gonna be obsolete,” he said.

“That’s as far as we know and there are even more [companies] that are threatening to move out. Just to get it clear, we do support the Trabaho bill, but there certain provisions in the original proposal that may harm investments,” Lachica said.

The bill is currently being threshed out in the Senate.  The SEIPI made public its position on the bill that include the retention of the autonomy of the Philippine Export Processing Zone, replacement of the 18 percent corporate income tax with 6 percent to 7 percent tax on gross income earned; restoration of VAT exemption for indirect exporters and the retention of customs duty exemption.

The group is also asking legislators to exclude equipment from the real property tax, which is one of the highlights of the Congress version.

“Another concern would be property tax. It’s being redefined not just building and land but also equipment―equipment that are on the ground. That’s not real property, that’s equipment. So it’s gonna add millions in taxes,” Lachica said.

The Philippine government expects to implement the measure in the first quarter of 2019.

Topics: semiconductor and electronics sector , exports , Semiconductor and Electronics Industry of the Philippines Inc. , SEIPI , House Bill 8083 , Tax Reform for Acceleration and Inclusion
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