DOF claims higher foreign investment pledges show investors unfazed by CITIRA

A reported increase in foreign direct investment (FDI) pledges during the first six months of the year shows that businesses are not spooked by the second package of the comprehensive tax reform program, the Department of Finance (DOF) claimed Wednesday.

“Despite the persistent fear-mongering activities of certain groups, the international investment community continues to signal its confidence in the policies of the Duterte administration and in the strength of the Philippine economy and its workforce, as illustrated by the surge in FDI pledges in the year’s first semester,” Finance Undersecretary Karl Kendrick Chua said.

“It goes to show that the noisy naysayers against the long-due efforts to reform the country’s convoluted corporate income tax system are mistaken,” he said in a statement.

Data released by the Philippine Statistics Authority (PSA) showed FDI pledges in the first semester grew by 111.504% to P95.6 billion from P45.2 billion in the same period last year.

The DOF claimed that the PSA numbers showed there is investor confidence despite the prospects of the Corporate Income Tax and Incentive Rationalization Act (CITIRA).

“We are glad that investors are aware of, and appreciate, the huge strides made by the Duterte administration in implementing its Zero-to-Ten-Point Socioeconomic Agenda, which include the massive ‘Build, Build, Build’ infrastructure program, improvements in ease of doing business, and the anti-corruption and peace and order measures of the President,” Chua noted.

Actual FDI down

While the PSA reported an increase in investment pledges, data released by the central bank this week showed a decline in actual investment flows.

According to the Bangko Sentral ng Pilipinas (BSP), actual FDI inflows in the first semester fell to $3.6 billion, reflecting a 38.8% drop from $5.8 billion a year earlier.

“Non-residents’ investments in debt instruments (or lending by foreign companies abroad to their local affiliates to fund existing operations and business expansion) registered lower net inflows of $317 million from $570 million,” the BSP said in a statement on Tuesday.

Various business groups in July warned that the CITIRA bill, formerly called the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO), would lead to investment losses and erase millions of jobs.

CITIRA seeks to reduce the corporate income tax (CIT) rates to 20% from 30%.

It also makes tax perks time-bound, transparent, targeted, and performance-based for a more competitive fiscal incentives system.

As proposed by the Department of Finance (DOF), 123 laws will be repealed and consolidated into one omnibus incentive code.

Earlier this week, the Information Technology and Business Process Association of the Philippines  said the growth of the IT-business process management sector could be halved should Congress pass CITIRA in its present form. —Jon Viktor Cabuenas/VDS GMA News