Clothing exports from the Philippines in Q3 declined over six per cent compared to the same period last year. Last year’s exports plunged 15.57 per cent from 2017. Because of labor and power costs, Philippine prices are high compared to prices of Lao, Myanmar and Vietnam. This leads to problems with international buyers. Therefore, garment makers in the Philippines want subsidies that can help them lower export prices of clothing products.
Besides tough competition at the global level, garments makers are faced with uncertainty at the domestic level over the move to rationalize fiscal incentives. Mostly located in economic zones, garments firms will need to give up their incentives once the Corporate Income Tax and Incentives Rationalization Act is passed into law. The measure will bring down corporate income tax to 20 per cent by 2029, from 30 per cent at present but will overhaul the set of tax perks granted to firms operating in economic zones. Among those that will be rationalized is the five per cent tax on gross income earned paid in lieu of all local and national taxes, which investors find crucial in maintaining operations in the Philippines.