Electronics industry to survive tax reforms

September 26, 2018

The local electronics industry can survive the scrapping of certain tax perks such as the 5-percent gross income earned (GIE), but radically revamping the Philippine Economic Zone Authority's (PEZA) processes may prove even more worrisome.

Maxim Integrated Vice President for Asia Factory Operations Richard Cohen said Tuesday that the company will work on whatever will be the final version of the second package of the Comprehensive Tax Reform Program (CTRP-2), noting that the policy would not result in any slowdown in its operations.

“The current government wants to improve infrastructure and they have the Build Build Build Program. Then if it becomes successful, then the Philippines becomes a better place to locate, and the offset maybe some lost of incentives” said Cohen.

“I think it’s part of the total package, so you have to look at the big picture and it is certainly part of it. But there are other things -- infrastructure, availability of labor -- they make your decision where you locate as a company,” he added.

He noted that the biggest benefit derived from locating inside PEZA zones is the ease of doing business as the investment promotion agency provides a one-stop-shop service for its locators.

The executive mentioned that with this PEZA service, companies need not undergo the hassle of dealing with different local government units to secure permits.

Rules in PEZA are also consistent.

“That would be something undesirable for us to remove that service that is applied for PEZA locators,” added Cohen.

Under the current tax regime, PEZA locators enjoy 5-percent special tax on gross income in lieu of all national and local taxes, except for value-added tax and real property tax.

Locators pay the 5 percent tax to PEZA, which in turn, remits the collections to the national coffers and local government units (LGUs) -- 3 percent is remitted to the national government while 2 percent is set aside for LGUs.