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  August 26, 2013: Tax breaks await labor-intensive investments

Specific sectors with strong labor generation capability as identified by the industry roadmaps would be highly considered for inclusion in the 2014 Investment Priorities Plan (IPP), which is expected to be a far cry from the previous annual list of preferred economic activities that are entitled to government tax and fiscal incentives.
Board of Investments (BOI) governor Lucita P. Reyes told reporters as the agency is set to start next month, September, the formulation of the 2014 IPP to be able to submit it to Malacañang by end of October to ensure a new IPP will take effect by January 2014.
As the lead government agency in the IPP formulation, Reyes said the BOI will have to assess what specific sectors or activities identified in the various industry roadmaps still require incentives to be competitive.
“We have to assess what specific sectors are to be included in the IPP. This means the new IPP could be longer because it is more detailed, we don’t know yet,” she said. Reyes said the new IPP would be like the IPPs in the ‘70s which identifies specific sectors.
But Reyes hinted that the new IPP would be leaning in favor of specific sectors that have strong labor generation capability. Processing or economic activities with high-value addition normally create more employment opportunities.
At present the BOI is using four parameters in evaluating a project for incentive purposes. These are net value added, labor generation, forward and upward linkages and measured capacity.
Measured capacity is derived from the supply and demand situation. If a demand in a particular sector has been filled up already, new entrants in such activity will no longer be entitled to government incentives.
“We want projects with some value adding and this involves not just simple processing but processes that is linked to labor generation. If an activity involves only simple process, it does not need a lot of labor,” Reyes said.
Reyes further said that by specific sectors, these can be activities in the midstream and downstream operation of a particular industry.
“We have to identify the gap in the value chain but not necessarily micro,” she said.
For instance, the copper industry has already identified wire rods as a specific sector that is labor intensive and is critical to fill in the gap in the electronics industry.
In addition, each sector will still have specific guidelines to ensure that only the deserving economic activities are granted the incentives.
Under Executive Order 226, the BOI grants qualified investments with a maximum of eight years in income tax holiday and zero percent duty on imported capital equipment.

Source: Manila Bulletin - August 26, 2013

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