Proposed global tax reforms under the Organisation for Economic Co-operation and Development (OECD) could bolster fiscal sustainability, but Philippine industry leaders are urging policymakers to tread carefully to avoid undercutting demand and competitiveness.
Elizabeth Lee, chairperson of the Federation of Philippine Industries, said broadening the tax base may lift revenues, yet abrupt changes—particularly to value-added tax (VAT) exemptions—risk unintended economic fallout.
She cautioned that removing VAT relief in socially sensitive sectors such as education, healthcare, and senior services could drive up costs for households and ripple through the broader economy.
“Any abrupt changes could ripple through households and, at the margins, labor markets, affecting employment and service access. Safeguards are essential and we must be sensitive on the effects of these changes,” Lee said.
Beyond consumption risks, industry is also wary of sweeping changes to investment incentives. While aligning tax perks with actual investment activity is sound policy, Lee stressed that reforms must be benchmarked against regional competitors. Southeast Asian economies continue to deploy aggressive fiscal packages to court foreign capital, making predictability a decisive factor for investors weighing options.
“Moving away from tax holidays, if and when implemented, must be carefully sequenced and regionally benchmarked to ensure reforms strengthen—rather than erode—the country’s investment appeal,” she added.
Lee underscored that timing and coherence will determine whether reforms succeed. A misstep, she warned, could chill investor sentiment just as the country pushes for industrial expansion.
She argued that tax changes should be paired with structural competitiveness measures, including lower logistics and power costs, improved infrastructure, and productivity upgrades.
“The success of fiscal reforms will hinge on careful sequencing—implemented at the right pace, in the right order, to preserve demand, sustain investor confidence, and support industrial expansion,” Lee said.
