Corporate tax reform to attract foreign medical devices investment — Fitch unit

MANILA, Philippines — Passing the Duterte administration’s proposed corporate tax reform could help the Philippines corner foreign medical devices investments and boost the country’s competitiveness, a Fitch unit said Wednesday.

In an industry analysis sent to reporters, Fitch Solutions said the bill seeking to reduce corporate tax could promote a “more business friendly environment” in the Philippines, boding well for medical device companies.

Fitch solutions added that higher investments, a large population and robust economic growth should fuel expansion in the Philippines’ medical device market, which is expected to grow 10.8% in local currency terms to P43.2 billion ($827 million) over the 2018-2023 period.

Free trade agreements in the region should also improve the Philippines’ competitiveness and ease the trading process for businesses, making it a more attractive destination for medical device companies.

“Foreign investment in the country is somewhat hindered by a high fiscal burden through the high tax rates, which pose operational headwinds to firms and create barriers to investment,” Fitch Solutions said.

The Duterte government wants to pass a bill reducing the corporate income tax rate on a staggered basis from the current 30% to 20% while removing redundant fiscal incentives.

However, business groups have expressed concerns over the proposed removal of some tax perks, saying the bill could force investors to relocate and result in job losses.

In his fourth State of the Nation Address last Monday, President Rodrigo Duterte asked Congress to pass reforms in the corporate tax system along with the remaining packages of his administration’s comprehensive tax reform program.

“[T]he extent to which companies will benefit from the tax reforms will be limited by the proposed changes in investment incentives,” Fitch Solutions said.

“We note that there have already been reports of some firms putting on hold their planned investments amid concerns of the proposed changes in the incentives regime,” it added. — Ian Nicolas Cigaral