Japanese firm puts on hold P40-B expansion project

TRABAHO BILL tagged

A Japanese manufacturing firm is putting its P40-billion expansion plan on hold amid uncertainty over tax perks, keeping the company from creating thousands more new jobs in the country.

Charito Plaza, director general of the Philippine Economic Zone Authority (Peza), disclosed this on Monday, noting that Murata Philippines is planning to further expand its local operations.

The problem, however, is that the project is postponed until tax incentives are either retained or improved under the divisive Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill, formerly known as Train 2 being the second tax reform package of the Duterte administration.

Train 2 fate

“The P40 billion is for Murata’s expansion of buildings and [its manufacturing] of new products, but they’re [putting it on hold] until they know the fate of Train 2,” she said in a text message.

The Trabaho bill will lower corporate income taxes in the country, while rationalizing the incentives offered to investors. The latter part is seen to hit Peza and other economic zones nationwide.

According to its website, Japan-based Murata Manufacturing Co. Ltd. has its largest production site in Asia in the Philippines, which was established in 2012.

Murata

Called the Philippine Manufacturing Co. of Murata, Inc. (PMM), it began its operations in Batangas in 2013 with the production of multilayer ceramic capacitors.

Plaza said the company is currently occupying 24 hectares of land with two buildings to manufacture its products. She said the expansion would have also created 6,000 new jobs.

“They’ll expand to two more [buildings] once incentives remain the same or an attractive [set of] incentives [in Train 2] will be passed,” she added.

Eligible for incentives

While Peza did not expound on the company’s reservations, the Japanese electronics firm may soon be eligible to enjoy the 5-percent gross income earned (GIE) tax in lieu of local and national taxes, a perk that will be removed under the Trabaho bill.

A company registered in a Peza zone can enjoy the 5-percent GIE tax after its income tax holiday expires after a few years, a likely cost efficient opportunity for the company.

At the Senate

The Trabaho bill was passed at the House of Representatives even though government officials later admitted they had yet to finish analysis on how jobs would be affected by the proposed measure.

The polarizing bill is now in Senate’s hands, a number of whom want to be re-elected next year despite the backlash the government had suffered for its recent efforts on tax reform.