CITIRA passage seen helping stem exit of multinational firms

THE PASSAGE of a corporate tax reform bill is expected to remove investor uncertainty which could help counteract the effects of a recent spate of closures among multinational firms operating in the Philippines, a senior legislator said.

Representative Jose Maria Clemente S. Salceda of Albay, who also chairs the House ways and means committee, said the recent closures highlight the urgency of passing the proposed Corporate Income Tax and Incentives Reform Act (CITIRA) “to end the wait-and-see mode of companies” and turn their investment pledges into actual investments which will create jobs to “offset losses from recently-announced closures.”

CITIRA, which will gradually bring down corporate tax rates while rationalizing incentives, is awaiting Senate approval after having been passed by the House in September, with the recent closures of Philippine operations by a Japanese automaker, a US bank and a Finnish telecommunications firm being enlisted in the effort to hurry the Senate along before session is suspended for the Easter break.

Mr. Salceda said he could call in the Department of Trade and Industry (DTI) to brief the House on the “trade-related aspects” affecting manufacturing competitiveness in the Philippines after the decision by Honda Cars Philippines to shut down automobile production in Sta. Rosa, Laguna.

“The committee is studying how to optimize tariff rates as a safeguard. Anti-dumping, countervailing, and other trade laws now in effect were also authored by this representation. The DTI may be called to the House to brief the leadership on what it proposes, given the trade-related aspects of manufacturing issues in the country,” Mr. Salceda said in an aide-memoire Monday.

Mr. Salceda has said that the committee is open to adopting a Senate version of CITIRA “that is fiscally acceptable, including the Fiscal Incentives Review Board (FIRB) expansion, and does not facilitate transfer pricing and other corporate maneuvers to avoid tax, such as breaking up into smaller companies to avail of what some Senators propose as lower taxes for smaller firms.”

Mr. Salceda said the broader issue of manufacturing competitiveness demands analysis of national factors such as the cost of doing business, to “determine the most suitable response” to the closure of businesses.

“But it appears that the problems these firms had were imported from abroad. In any case, we are studying the issues. Right now, our national fundamentals are still stable. Tomorrow, I am briefing Congressional leadership and propose calm but decisive action,” he said.

Aside from Honda, Wells Fargo & Co. and Nokia Corp. are also “leaving the Philippines not because of country-specific reasons, but because of issues of cost and competitiveness within the companies themselves,” Mr. Salceda said, adding that the companies’ problems in the Philippines are “basically imported.”

“There are firm-specific issues among all the cited companies. Wells Fargo was slapped with a $3 billion fine in the US. Honda has been overwhelmed by competition in the small-sedan segment. And Nokia has retreated globally as a technology firm,” he said.

Mr. Salceda said Honda’s problems are “primarily competitiveness-related” as its market share has been eroded by competitor Toyota Motor Corp.

Wells Fargo & Co. is downsizing its business process outsourcing operations in the Philippines, leaving only 50 tech workers out of 750 by the end of 2020, Mr. Salceda said.

He said the restructuring is part of the company’s “global workspace strategy,” which he believes simply indicates that it wants to “reduce costs after having been hit by a $3-billion fine.”

Meanwhile, the Nokia Technology Center Philippines in Quezon City is closing down this year, which, according to Mr. Salceda, will affect 700 IT professionals and administrative staff.

“The move is not isolated to the Philippines. The planned closure of Nokia Technology Center Philippines is parallel to Nokia’s problems in its home country in Finland, where it will make 180 job cuts as part of a plan to slash 500 million euros in operating costs,” he said. — Genshen L. Espedido