The country’s umbrella organization of exporters is seeking a comprehensive package which includes providing incentives such as reduced value-added tax (VAT) and power rates for investors in the textile industry to allow the sector to grow and capture opportunities amid the ongoing trade war between the US and China.
Robert Young, trustee for the textile, yarn and fabric sector of the Philippine Exporters Confederation Inc. and president of the Foreign Buyers Association of the Philippines, said there is a need to come up with a package with guaranteed and honored tax benefits for firms that will invest in the textile industry.
He said the program should be “unlike the TRABAHO (Tax Reform for Attracting Better and High-Quality Opportunities) bill that investors are surprised or compromised with new tax amendments and schemes.”
Under the TRABAHO bill, the government aims to gradually lower the country’s corporate income tax considered among the highest in Southeast Asia to 20 percent from 30 percent, and rationalize fiscal incentives including removing the five percent tax on gross income earned incentive enjoyed by locators in the Philippine Economic Zone Authority’s ecozones.
To attract investments in the textile industry and take advantage of opportunities from the ongoing US-China trade war, Young said there should be a reduction in the 12-percent VAT, grant of special concession power rate, incentives to compensate labor rate differential, as well as duty-free importation of textile machinery or equipment.
He said the country has not fully taken advantage of the opportunities offered by the trade war.
While the Philippines has been offered to serve the transferred production orders from China due to the trade war, the country has only catered to 10 percent of the relocated garment orders.
The bulk of the relocated garment orders went to Vietnam due to its investor-friendly policies to attract more foreign direct investments.
“We have benefited only on a very small scale, the reason being is that the Philippines is not ready. We lack competent manufacturers and locally-milled textile plus required accessories,” Young said.
Given the current trend of automation and data exchange in manufacturing or Industry 4.0, he said having a textile technology course initiated by the Department of Science and Technology would also be beneficial for the industry.
“Textile has revolutionized in the last five years,” he said.
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