First Gen exec: TRAIN 2 is a ‘misguided’ policy

By Lenie Lectura – September 24, 2018
from Business Mirror

THE second package of the Tax Reform for Acceleration and Inclusion (TRAIN) program, which was renamed Tax Reform for Attracting Better and High-Quality Opportunities (Trabaho), is a “misguided policy” because it will discourage potential investors, particularly those interested in renewable energy (RE).

“From an energy and sustainability standpoint, I think it’s a misguided policy to remove the incentives from renewable energy just as we need to transition into clean energy. We’re headed in the wrong direction,” First Gen Corp. Director and Executive President Richard Tantoco said.

Among others, Trabaho proposes to cut corporate income tax from 30 percent to 25 percent and take away fiscal incentives, including tax exemption, from businesses in export-processing zones.

“If you remove the fiscal incentives, the impact on renewable energy is like  taxing it 10 times of coal, which is what we need to begin to transition out of,” Tantoco said.  “It’s an uncertainty on the entire industry. It’s a major uncertainty because people are looking at their numbers and they don’t know whether they’re going to have a 10-percent income tax or 30 percent. They don’t know if they’re going to be able to import without duties or with duties.”

“Definitely today with the specter of the bill hanging over the industry’s head, we will see investments slow down,” Tantoco said.

Early this month, the House of Representatives approved the bill amid concerns raised by business leaders that if fiscal incentives were taken away, investors would relocate their businesses to other countries.

Finance Undersecretary Karl Kendrick T. Chua earlier said businesses that do not contribute to export growth and the economy would lose their fiscal incentives and that some call centers would be adversely affected.

Tantoco said the Lopez group, through various industry associations, has voiced out its concerns and was told to submit a position paper.

First Gen has interests in power generation, distribution, infrastructure, manufacturing and property development. Natural gas is the company’s largest platform. It has four gas plants, with an installed capacity of 3,470 megawatts  located in the First Gen Clean Energy Complex in Batangas City.

It is also engaged in hydro, geothermal and other RE sources via First Gen Hydro and Energy Development Corp.  First Gen Chairman Federico Lopez noted the implementation of the tax-reform program “could change the landscape.”

It’s happening. I can see it with some of our locators in the industrial park. Their expansion is on hold. They always get this opportunity to go, put it up in Vietnam and other places, which is what’s happening,” Lopez said.

He also cited the possibility of job losses if investors would relocate their business somewhere else. “The Philippines, having a very good work force, a young work force, should be one of the main beneficiaries of that. If we do this, they won’t come in. They’ll just go to Vietnam.”

Tantoco added, “You can’t have a shotgun approach. To me, it is a blessing that work force is just there. If we don’t take advantage of that demographic dividend, it could actually turn into a demographic time bomb.”