DTI: TRABAHO, NEGOS I: TRABAHO, NEGOSYO, O, KABUHA KABUHAYAN, A - - PDF document

17/04/2018 1

WALLACE BUSINESS FORUM

17 April 2018

DTI: TRABAHO, NEGOS I: TRABAHO, NEGOSYO, O, KABUHA KABUHAYAN, A N, AT K KONS NSYUMER YUMER (TNKK) (TNKK)

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We w want t nt to pro provide ide more liv more livelihood b elihood by attracting more attracting more in investments. stments.

Ho How do we attract more w do we attract more in invest stor

• rs?

s?

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Manufacturing 8.6% Construction 5.4%

2017 GDP

Industry

7.2%

Services

6.7%

3.9%

3 MAJOR SECTORS

10.2%EXPORTS

US$ 10.05 Bn

FDI

Foreign Direct Investments (2017)

6.7%

FDI in Manufacturing soared

244% in 2017

IMPR IMPROVED PO POTE TENTIAL CAP L CAPACI CITY TO TO SUST SUSTAI AIN GR N GROWTH TRAJ TH TRAJECTORY

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AGGRESSIVE INVESTMENT AGENDA TO SPRINGBOARD TOWARD HIGHER GROWTH The government’s infrastructure program should expand absorptive capacity.

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PROSPECTS FOR THE PHILIPPINE ECONOMY REMAIN BRIGHT

• The Philippine

economy is expected to sustain its growth momentum over the medium term, consistent with third party assessments.

39.6%

Increase Highest in 50 year history.

2015 2016 2017 Php 617 B Php 442 B Php 367 B

BO I Appr oved Invest m ent s

US$ 7. 9 B

Business Confidence Consumer Confidence

43.3% 9.5%

Philippines is the BEST COUNT BEST COUNTRY Y to invest in Manufacturing

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PHILIPPINES’ CREDIT RATING

Fitch upgraded PH rating last 15 January 2018, S&P reaffirmed PH ratings as of 18 January 2018, and Moody's reaffirmed PH ratings last 27 June 2017.

Baa2 BBB BBB

US$ 7.9 B

DEMO DEMOGRA GRAPHI HIC S C SWEE EET SPO T SPOT

JAPAN, 45. 4 UAE, 30. 2 USA, 37. 1

THAILAND, 34.7 PHILIPPINES, 23.1 VIET NAM Filipinos are younger compared to the rest of the world. The median age in the Philippines is 23.1 years old. This is equivalent to the age of someone who recently graduated from college.

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ENTREPREN ENTREPRENEURSH EURSHIP OPPORTUNITIES OPPORTUNITIES

Mindset: Embrace the right positive entrepreneurial attitude Mastery: Master the know‐how and how‐tos of entrepreneurship Mentoring: Provide continuous business guidance, with help from private sector partners Markets Access: Link MSMEs to domestic and foreign markets Machines: Equip MSMEs with machines and improved technologies to innovate and produce better products more efficiently Money: Provide alternative & accessible sources of financing for MSMEs Models: Provide business ideas and models

ENTREPRENEURSHIP OPPORTUNITIES ENTREPREN ENTREPRENEURSH EURSHIP OPPORTUNITIES OPPORTUNITIES

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MINDSET, MASTERY & MENTORING

816 established

MINDSET MINDSET, MASTER MASTERY & Y & MENT MENTORING ORING

MONEY

MONEY MONEY

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MACHINE

2,231

Established SSFs

1.195B 164,668

Jobs generated

307,855

Beneficiaries Cost

MA MACHINE CHINE

MACHINE

WEAVING MACHINE DRY POWDER PACKAGING COCO COIR MACHINE TURMERIC TEA MACHINE

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On Labor Contractualization

SECURITY OF TENURE & PROTECTION WORKERS RIGHTS FAIR RETURN

TO

INVESTMENTS GLOBALLY COMPETITIVE INDUSTRIES

Labor Contractualization

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FLEXIBLE WORK ARRANGEMENTS

CONTRACTING & SUBCONTRACTING

OUTSOURCING WORKERS WITH FULL RIGHTS & BENEFITS SECURITY OF TENURE

DTI’S PROPOSED STRUCTURE VS. CURRENT PRACTICE

CURRENT PRACTICE

PROPOSED STRUCTURE

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FAIR AND HARMONIOUS RELATIONSHIP BETWEEN LABOR AND CAPITAL

On Tax Reform for Acceleration and Inclusion Package 2

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General principles of TRAIN Package 2

Performance Based

Targeted Time- Bound

Transparent

Importance of TRAIN Package 2

1) Will reduce Corporate Income Tax Rate for all 2) Will modernize incentives regime (i.e. more responsive & relevant) in terms of:

– What activities & Who can be given incentives? – What incentives can be given?

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What & who can be given incentives?

Current Filipino‐owned

• 1. Activities under the

Investment Priorities Plan (IPP), both for Domestic or Export markets

• 2. Export‐oriented

Foreign‐owned

• 1. Activities under IPP, but for

Export markets

• 2. Export‐oriented (PEZA)

TRAIN P2 Filipino‐owned or Foreign‐

• wned
• 1. Activities under the

Strategic Investment Priorities Plan (IPP), both for Domestic or Export markets

• 2. Export‐oriented (PEZA)

What incentives can be given?

Current

• Basic ‐ Income Tax

Holiday for 4yrs

– Add’l years subject to certain conditions (e.g. pioneering, labor and/or forex generation)

• PEZA & certain IPAs

– 5% tax on Gross Income Earned (GIE) TRAIN P2

Menu of Incentives, subject to SIPP

• Income Tax Holiday
• 50% tax allowance for investment (of actual

capex incurred w/in 3 years);

• Double

deduction for R&D and training expenses;

• Additional deduction for labor expense;
• 100%

deduction for infrastructure development;

• Deduction

for reinvestment allowance to manufacturing industry

• Enhanced NOLCO (net operating loss for 1st

4 years from the SCO may be carried over w/in next 10 consecutive taxable years)

• Accelerated Depreciation

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Example of what will happen to a locator in PEZA and in some IPAs

Current

Project A

• Yr 1‐4: Project A,

enjoy Income Tax Holiday (ITH)

• Yr 5‐forever: 5%

GIE

TRAIN P2

Project A (registered on Yr 1)

• Yr 1‐4: Enjoy ITH
• Yr 5‐end of project life: Regular Corp.

Income Tax (CIT) Project B (registered on Yr 4)

• Yr 4‐8: Enjoy ITH
• Yr 9‐end of project life: Regular CIT

Project C (registered on Yr 6)

• Yr 6‐9: Enjoy ITH
• Yr 10‐end of project life: Regular CIT

Proposed TRAIN 2 Incentives Package

Then 2 years of the following:

• 1. 15% reduced corporate income tax;
• 2. 50% tax allowance for investment (of actual capex

incurred w/in 3 years);

• 3. Double

deduction for R&D and training expenses;

• 4. Additional deduction for labor expense;
• 5. 100%

deduction for infrastructure development;

• 6. Deduction

for reinvestment allowance to manufacturing industry

• 7. Enhanced NOLCO (net operating loss for 1st 4 years

from the SCO may be carried over w/in next 10 consecutive taxable years)

• 8. Accelerated Depreciation

+

3‐year

Income Tax Holiday

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Updates on the TRAIN Package 2

Currently, three (3) bills have been filed:

House Bill 7214

(20 Feb 2018) =================

• Rep. Horacio Suansing
• Rep. Estrelitta Suansing

House Bill 7364

(08 Mar 2018) =================

• Rep. Sharon Garin
• Rep. Rodel Batocabe

House Bill 7458

(20 Mar 2018) =================

• Rep. Raneo Abu
• Rep. Aurelio Gonzales
• Rep. Dakila Carlo Cua

We are open to inputs on:

• Transitioning those currently receiving 5% GIE
• Incentives for 100% Export‐oriented activities
• Other incentives to be included in the Menu
• BUT, any suggestion should: 1) Conform to

basic Principles (performance‐based, targeted, time‐bound & transparent) and 2) Be given with Empirical Support

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On Amending the Retail Trade Liberalization Act of 2000

RA 8762: The Retail Trade Liberalization Act of 2000

Investing in the retail trade business in the Philippines is subject to the following categories:

Category A Refers to enterprises with paid-up capital of less than US$2.5 million and reserved exclusively for Filipinos and corporations fully owned by Filipinos. Category B Refers to enterprises with a minimum paid-up capital of US$2.5 million but less than US$7.5 million which can be wholly owned by foreigners after two (2) years of the Act’s effectivity (foreign participation is limited to only 60% of the total equity for the first 2 years). Category C Refers to enterprises with paid-up capital of US$7.5 million and above which can be wholly

• wned by foreigners, provided that investments for establishing a store in categories B and

C will not be less than US$830,000. Category D Refers to enterprises that specialize in high-end or luxury products with paid-up capital worth US$250,000 per store and may be wholly owned by foreigners.

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DTI Position

RA 8762 Restrictive Liberalize Lower paid-up capital requirement from US$2.5 M to US$500,000

Thank you.

F O L L O W U S

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