Japanese investors worry about Trabaho, endo bills

CEBU, Philippines — The Japanese Chamber of Commerce and Industry of Cebu Inc. (JCCICI) calls for improved infrastructure in Cebu to further ease in doing business as it expresses concern on the government's Trabaho and Endo bills that may affect the sentiment of Japanese investors in Cebu.

While Japanese companies are currently doing good in their operations in Cebu, proposed measures seeking to rationalize fiscal incentives and put an end to job contractualization are among the concerns of Japanese investors, said Ken Iwakami, secretary general of JCCICI.

"Currently, we are okay but there are some concerns such as Trabaho, Senate Bill 1826 about labor code, lease contract of MEZ (Mactan Economic Zone) locators, etc.," Iwakami told The FREEMAN yesterday when asked about the chamber's concerns in doing business in Cebu.

The Trabaho bill is the second package of the government's tax reform which seeks to cut corporate income taxes and streamline fiscal incentives for several sectors.

While Senate Bill 1826 or the Endo Bill, which the Senate recently approved, aims to end illegal contractualization and guarantees security of tenure for employees by preventing labor-only contracting.

"Of course, continuous improvement in infrastructure such as traffic, power and water and so on is a quite important for us," Iwakami said.

Iwakami warned about the possible impact of Trabaho, if the government pursues it, on investors locating at economic zones.

Currently, JCCICI has 138 member companies, about 99 of them are firms registered with the Philippine Economic Zone Authority (PEZA). 

"72% of our regular members are PEZA registered companies and about 75% out of them have already enjoyed benefits for more than 10 years already," the chamber official said.

"You can know easily see what a big impact to us the issue of Trabaho is," Iwakami further added.

In July last year, the business group submitted its position paper to the Department of Finance and PEZA, lobbying its concerns on the corporate tax reform.

 The position paper, a copy of which was furnished to The FREEMAN yesterday, bared a survey among JCCICI's PEZA registered members on their view on the tax reform.

According to the survey done between May and June last year, about 27 percent of Japanese firms located in economic zones in Cebu planned to pull out their investments in the country.

That if the government pushes through the opposed tax reform. While others might shift their operations overseas, and might reduce their production scale and consequently reduce their labor force.

PEZA-registered investors have been enjoying tax perks, offsetting the high cost of doing business in the Philippines.

However, these incentives are now at risk as the second tax reform package wants to rationalize them despite PEZA’s protests.

The bill will lower the corporate income taxes in the country, currently among Southeast Asia's highest.

The bill will still offer tax perks such as income tax holidays of a few years but will eventually remove the 5-percent gross income earned (GIE) tax applied to PEZA-registered firms in lieu of all other taxes.

About 75 percent of survey respondents said they had benefited from the current tax incentives for more than a decade now. While 85 percent of the respondents said they would still choose the Philippines for expansion if the tax benefits continue.