Taxes and labor inspections drive investors away
Businessmen are being pushed into the cliff between heavy taxation and too much labor regulations.
In a labor excess economy where more than five million are unemployed and 15 million are underemployed, the government should be mindful of the need to balance both taxation and labor administration. On taxation, Philippine Economic Zone Authority Director General Charito Plaza has reported that major foreign investors are putting on hold their expansion plans due to concerns about the government tax reform package. Earlier last year, the same PEZA official was reported to express anxieties over the DOLE activism in the inspections of companies inside the economic zones. These two, taxes and DOLE inspections, are perceived as driving investors away.
The country's top economic policy advisers should reflect deeply and immediately on the conflict among the following economic variables: unemployment problem vis-a-vis direct foreign investments and also foreign investments and taxation. Among the ASEAN member-nations, the Philippines has the lowest in amounts of direct foreign investments. Thailand and Vietnam are becoming the favorite investments havens, following Singapore, Malaysia, and Indonesia. The Philippines, with its strategic location, its massive population, and educated labor force that can speak good English, with very fine weather and beautiful rest and recreation centers, is losing even to Myanmar, Laos, and Cambodia.
Taxation is too high and too anti-business. The TRAIN 2 is being dreaded as capable of putting the foreign investors' returns in jeopardy. The internal revenue people have failed to explain to the foreign investor community the positive sides of that tax measures. The economic team has failed to formulate an effective communication plan to allay the fears of the business community, especially the PEZA locators. This writer used to sit in the PEZA Board of Trustees representing the Department of Labor and Employment, when I was undersecretary during the time of former president Gloria Arroyo and PEZA secretary general Lilia de Lima. We were always pro-active in engaging the investors in dialogues on issues of taxation and labor problems. During our times, investments reached unprecedented volumes.
On labor problems, the contractualization issue lingers as a Sword of Damocles over the heads of PEZA locators. I am going to convene a group of about 300 Human Resources managers in Laguna to discuss our coping mechanism regarding inspections. The DOLE regional director in CALABARZON was one of the most feared among labor directors because of her unforgiving drive against the so-called labor-only contracting. Lately, it is reported that she will be transferred to Central Luzon. The president has aborted his scheduled meeting with labor leaders on the sixteenth of this month. This could be a sign that the dreaded abolition of outsourcing has been shelved.
Well, we cannot blame the president. He has the mandate to balance many things. He is responsible for the entire economic system. He cannot make decisions that can create imbalance among the many players in the Philippine economy.
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