Exporters seek tax incentives

The embattled export sector has appealed to the Arroyo administration for the grant of tax incentives under the Export Development Act of 1894 that were ignored by previous administrations.

The appeal was aired by Philippine Exporters Confederation (Philexport) president Sergio R. Ortiz-Luis, Jr. as the industry reeled under a global trade slowdown and in the wake of the decision of the World Trade Organization (WTO) to address the issues raised by developing countries for fairer trade under its rules.

The export leader pointed out that the export law spelled out two types of tax incentives. The first was the granting of tax credits to export firms that showed spectacular sales growths. It was an incentive for better than good performance. No tax credits were ever granted, according to Ortiz-Luis.

The second type of incentive was supposed to be granted to exporters who use local raw materials as substitute to imports. This incentive was meant to favor most of the sector’s small and medium export firms that use mainly local raw materials like the food processing and handicraft industries.

The incentive was not only denied the indigenous producers. That part of the law was not even covered by the implementing rules and regulations, the Philexport official pointed out.

The Department of Finance (DOF) may have been justified in its fears that the incentives may have violated WTO rules then, but not now when clearer rules are getting hammered out, Ortiz-Luis said.

Already recognized by WTO are non-actionable subsidies, those that are needed as part of a country’s development goals, he said.

The Doha development round of negotiations of WTO ministers in Qatar last month, Ortiz-Luis noted, opened the way for the extension of export subsidies by developing nations whose exports a year add up to less than one percent of world trade.

"The Philippines is eligible in taking advantage of the relaxed rules on subsidies and counterveiling measures," Ortiz-Luis asserted.

He revealed that the WTO committee on subsidies and counter-veiling measures computed Philippine share in world exports at 0.60 percent and ranked 153 among 184 countries and territories.

The Philippines has until February next year to ask for exension and up to July 2002 for special and differential treatment under WTO rules.

Orti-luis said the Doha round has bent in favor of the developing world by agreeing that:

• Further tariff reductions will take into account the special needs and interests of developing and least developed country members of WTO;

• Reduction and eventual phasing out of subsidies in agriculture and other barriers to trade in agriculture products erected mostly by the developed countries;

• Consideration of less restrictive methods of calculating garment and textile quota;

• Special attention to trade facilitation with specific mention of international customs cooperation on valuation; and

• Clarification of acceptable anti-dumping regimes. — Abe Belena, Philexport News & Features