Perks for job retention to be removed

MANILA, Philippines – Crisis-hit firms that retain or hire more workers may not be eligible for tax perks this year after all as the Board of Investments (BoI) has reversed an earlier policy decision.

The BoI — the lead agency in charge of compiling the annual list of activities eligible for incentives — has struck job retention off the draft after receiving word from the National Economic and Development Authority (NEDA) that the economic crisis is supposedly over, managing head Elmer C. Hernandez said on Friday.

This was contrary to his announcement a week earlier that the BoI was looking to retain the entry, first introduced in the 2009 Investment Priorities Plan (IPP), in this year’s version.

“BoI was informed that the crisis was declared over in late December,” Mr. Hernandez told reporters. “We decided to remove this contingency list from the 2010 IPP on this information.”

He said, however, that the board would be clarifying with the NEDA this week whether the declaration was indeed made.

The BoI, under last year’s IPP, granted up to three years income tax holiday to existing operations “affected by the current global economic crisis”. The perk would kick in once the firm’s earnings computed before tax and depreciation are in the black.

Mr. Hernandez clarified that firms which submitted applications for tax perks under this provision would still be considered sans the final 2010 IPP.

The BoI, he said, had in fact last week approved semiconductor packaging manufacturer Yosiko Industries, Inc.’s application. The firm qualified because the electronics industry was hit hard by the downturn and a check on their workforce showed no layoffs were imposed.

Three other applications received back in December may also bag incentives as the 2009 IPP remains in effect.

The BoI, Mr. Hernandez said, is mulling tax perks for micro and small-sized enterprises in the manufacturing sector if the incentive for job retention is removed. Even if the small enterprises do not undertake “preferred activities”, they may get tax perks by virtue of their size, he said.

But the perks will not be granted to small firms that engage in retail, small-scale mining, activities that threaten security or health or morals, among other restrictions.

Sought for comment, the Employers Confederation of the Philippines (ECoP) said the provision of hiring incentives should still be retained this year, at least for certain industries.

“While there are signs of recovery in some sectors, the growth is still fragile,” ECoP President Edgardo G. Lacson said in a text message on Friday.

“Removal of rewards must be done by sector, not across the board… Otherwise it might precipitate a spiral of widespread layoffs,” Mr. Lacson said.

“Government must continue to bite the bullet a little longer to preserve the momentum of growth.”

The BoI draft is up for an inter-agency consultation this week, Mr. Hernandez said. —Jessica Anne D. Hermosa, BusinessWorld