Business World
BY JESSICA ANNE D. HERMOSA, Senior Reporter
A NEW TARIFF structure proposed for goods traded outside preferential agreements plans to support existing investments by keeping rates favorable for manufacturers such as those that make electronics and glass, officials yesterday said.
But the draft, which will lay down duties for 2011-2015, is less lenient on unrealized investment pledges and for instance proposes to nix tariff protection for a long-delayed naphtha cracker project, they added.
Once approved, it will replace Executive Order 574 which sets tariff rates up to this year only.
The document generally retains the 0% duty on various products, including electronics and their components, despite a Finance department proposal to hike these to 1% for revenue generation, said Edgardo R. Maralit, acting commissioner at the Tariff Commission, in a telephone interview.
"We reviewed their recommendation. But we have standing international and investment commitments," Mr. Maralit said.
The Philippines is home to over 200 electronics companies, some of which import components for further assembly into semiconductors, the country’s top export earner.
The country is also a signatory to the World Trade Organization’s Information Technology Agreement, which requires the duty-free trade of electronics.
The Finance department, for its part, is not fazed by the rejection of its proposal to hike the 0% duties to 1%.
The draft anyway proposes to raise tariffs on several other goods, Finance Undersecretary Gil S. Beltran said, which should bring in roughly P10 billion in additional tax revenues annually.
Goods which could see higher tariffs include flat glass and voltage regulators, Mr. Beltran said without elaborating, again hinting at the draft document’s preference for existing investments.
The Philippines has room to raise duties as ceilings it committed to the World Trade Organization (WTO) are at an average of 30.1%. The actual applied average in 2009 was just 7.07%, according to data from the Tariff Commission.
"We should give a little protection to domestic investment," Mr. Beltran said.
The tariff policy’s bias for investments, however, may just stop short at existing projects as the draft proposes to nix the protection granted to JG Summit Holdings, Inc.’s long-promised naphtha cracker.
The recommendation is to lower the tariffs that will protect the proposed plastic resins factory from import competition, a ranking official who declined to be named said.
Tariffs on imported ethylene and propylene -- which the factory will produce -- currently stand at 15%, making the raw material expensive for local downstream plastic manufacturers.
Board of Investments data show that the factory will come on stream only by January 2014 under a third revision of the project proposal which was first filed with the state agency in 2005.
The tariff draft, meanwhile, will have to go through the Cabinet-level Tariff and Related Matters committee before it can be endorsed by the National Economic and Development Authority (NEDA) board and then eventually issued as an Executive Order (EO) by the president, Mr. Maralit said.
"It is being proofread now. And we’re also waiting for the Energy department’s recommendation on ethanol tariffs," he said, adding that concerned offices were trying to get the EO ready before Congress resumes its session on Jan. 16.
The current tariff structure will remain in force in the meantime, Mr. Maralit said.
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