Global aircraft maintenance, repair and overhaul services provider Lufthansa Technik Philippines threatened to leave the Philippines once the government passed the proposed Corporate Income Tax Incentives Reform Act bill in its current form.
Lufthansa Technik Philippines president and chief executive Elmar Lutter said the company would close down all four of its facilities in the country and transfer to a bigger Asian hub outside the Philippines.
The company employs 3,000 workers in its main office in Pasay City and its satellite offices in Cebu, Clark and Davao. Lutter said while they were originally considering the Philippines to be a candidate for its Asian hub, they were now looking at other countries.
“The Philippines is included since it has something to offer us, although it’s not at the top of our list first,” he said.
He said the CITIRA bill would be a big factor in their decision. “We noted that there was no special provision for the MRO industry in the bill. We are normally treated as an export manufacturer thus we are exempted from duties for the importation of raw materials. It’s the same thing for spare parts. We have no representation in CITIRA,” Lutter said.
“These are very special provisions which have to be inserted for the MRO industries. Otherwise, the whole industry cannot survive. Surely, the company cannot just contract from outside the country. It will lose work from Philippines allies—domestic carriers which fly internationally,” he said.
“We’re sorting out plans to establish an Asian regional hub that will host bigger capacity and facilities. We will maintain existing offices in the region and in the Philippines as well if the investment situation here improves,” Lutter said.
He said the company was even eyeing to expand its operations in the Philippines but shelved the plan
until there were definitive results on the CITIRA bill.
“We will see if we’ll have higher taxes. We will wait for the bill to pass, before [we consider] expansion,” Lutter said.
He said Lufthansa Technik also planned to add more workers under the expansion plan. “We’re just waiting for the right signals,” he said.
Among the highlights of the CITIRA bill are the gradual increase in gross income earned or GIE ratio of exporting companies to as high as 8 percent to 10 percent from the current 5 percent and the gradual reduction in the corporate income tax rate from 30 percent to 20 percent by 2029.
The second package of the Comprehensive Tax Reform Program was refiled as CITIRA bill in the 18th Congress after the Tax Reform for Attracting Better and High Opportunities or TRABAHO bill failed to advance during the 17th Congress.