Philippine auto assemblers slam Ford tax incentives

Philippine auto assemblers slam Ford tax incentives

MANILA (AFP): Philippine auto assemblers have expressed alarm
over a government decision to grant tax incentives to a project
by U.S. auto giant Ford Motor Co., reports obtained yesterday
said.

The assemblers, mostly affiliates of major Japanese auto
companies, have filed a protest with the Department of Trade
asking for a decision to grant Ford tax breaks to be withdrawn.

The incentives would give a "clear and unintended advantage to
a particular participant to the detriment of others in the same
(auto) program, " Vicente Mills, president of the Chamber of
Automotive Manufacturers of the Philippines said in a letter to
Trade Secretary Cesar Bautista.

A Philippine government agency said Thursday it had approved
limited tax incentives to a proposed 6.18 billion peso (154
million-dollar) project by Ford.

The project, to include an assembly plant for the domestic
market and parts manufacturing facilities, was granted a special
five percent gross income tax rate in lieu of other national and
local taxes, the Philippine Economic Zone Authority (PEZA) said
in a statement.

The corporate income tax rate in the Philippines is 35
percent.

The government will waive value added taxes on imported
machinery and equipment for the facilities, but Ford "will have
to pay the corresponding duties on machinery it will import," the
PEZA board said.

Mills said in his letter that PEZA's action would "erode
confidence and weaken the commitment of existing participants to
the government-sponsored automotive program."

He stressed that Ford should register its project under an
existing motor vehicle development program, (MVDP) which does not
offer fiscal incentives for new auto assembly plants.

Mills also questioned the decision to grant incentives at a
time when the local industry is reeling from a slump amid the
Asian economic crisis.

"We see no compelling reason... to granting special
incentives to Ford for assembly operations," the letter stressed.

PEZA director Lilia de Lima said earlier, Ford is only getting
a limited package and has not been granted an income tax holiday,
which is reserved only for export-oriented PEZA enterprises.

The Ford project will be the biggest venture in the sector in
the Philippines. It will also mark the U.S. giant's return to the
country after it pulled out 16 years ago at the height of an
economic crunch.

In 1996, Ford's rival General Motors Corp. passed the
Philippines up in favor of Thailand as the site of a major plant.
General Motors has delayed opening the plant because of the Asian
economic crisis.