Trade and Industry Acting Secretary Elmer C. Hernandez, who is also BoI managing head, revealed this move saying he had already talked with Finance Secretary Margarito Teves regarding the grant of tax perks. Teves, in turn, has instructed a DoF official to act on the BoI proposal.
"In the next two weeks we have to know exactly what to do with the AEP," Hernandez said. Public consultations are expected to be conducted starting next week.
Hernandez pointed out the need to enhance the existing AEP, which only grants incentives to CBU exports, because automotive manufacturers including Toyota Motor Philippines Corp. (TMPC) have pending investments in the auto parts manufacturing.
On the CBU part, he noted the need to "revisit" the number of units being exported stressing "we have to balance value against volume" to be able to see a significant impact on the country’s CBU exports.
The present AEP puts more emphasis on the value of exports rather than volume. For every $50 million annual CBU exports, the exporter is entitled to tax credits, which it can use to settle for the duties of its imports of not-locally assembled units.
"This means that the CBU exports should not only be volume-oriented but value-oriented as well. In order to effect a meaningful CBU exports, we have to look at significantly meaningful volume," Hernandez said.
He further noted that the present value-oriented CBU exports’ scheme only maximizes the exporter’s credits or incentives by exporting top-end or expensive units rather than maximizing its exports volume.
"Thus we have to revisit the value-orientation of our CBU exports program to enhance our exports performance," he said.
He, however, said that the revenues generated from the exports of CBU packs to other ASEAN countries under the AEP program have a positive revenue impact vis-à-vis the taxes waived.
In the case of auto parts and components, Hernandez said, there are pending investments including that of the Toyota Motor Phils. Corp.
Thus, there is no more question as to the inclusion of auto parts exports in the grant of incentives. The remaining hurdle now is the formula that should be used to enable the local parts manufacturers to benefit from the incentives.
Hernandez also cited the need of further diversifying the exports of auto parts and components from the traditional wiring harness, which is dominated by a handful of players only.
To diversify the country’s automotive exports, Hernandez is pushing for the transformation of the Philippines as a real transmission hub in ASEAN.
