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Local think tank Action Economic Reforms (AER) urged the Senate to remove the tax exemption provision under the bill that grants San Miguel Corp. (SMC) a franchise for the construction of the “New Manila International Airport” in Bulacan.
The AER made the call, noting that “taxpayers should get rid of the burden” if a private sector decides to build a new airport.
“San Miguel has the freedom to build its airport if it wants to compete with Naia (Ninoy Aquino International Airport) and Clark [International Airport], but like any business or entrepreneurial activity, you must fully bear the risk, “the local think tank said in a statement on Thursday.
“The executive branch of government has also made clear that public funds should not bear the risk or the costs. Clearly from his statement, Finance Secretary Carlos G. Domínguez will not accept that the government and taxpayers be burdened by the costs, including tax expenditures, of this unsolicited private company. The costs and risks must be borne by [Ramon S.] The companies. “
Previously, Undersecretary of Finance Teresa S. Habitan rejected the proposal to provide tax incentives for the proposed Bulacan airport.
Despite this, the House of Representatives earlier this month passed the bill in its third and final reading.
The Chairman of the House Ways and Means Committee, Joey Sarte Salceda, has also said that his committee is looking at foregone revenue of around P38 billion in national build-period revenue, and around P1.5 thousand. million to P2 billion annually once the airport begins operating.
In the same statement, the AER also argued that tax incentives can only be justified when there is a market failure and that there is no “compelling reason” for the government to subsidize another airport as congestion will be avoided by supplying of air transportation services that NAIA and Clark will provide.
He explained that the market failure is absent because current and future demand for air travel can be addressed by upgrading and expanding existing airports.
“On the same line, a new airport that is very close to CRK [Clark International Airport] does not provide substantially additional public benefits. The service it provides, from the perspective of the public good, is redundant. Therefore, the government and the taxpayer should not bear the construction costs of this airport, ”he added.
He also warned that legislating another tax incentive under the franchise bill undermines the objective of the Corporate Recovery and Tax Incentives Bill for Companies (Create), which seeks to “streamline the tax incentive system and improve the country’s competitiveness.”
“It sets a dangerous precedent in which individual corporations will simply approach Congress for tax benefits, rather than follow the systematic criteria for tax incentives that Create offers. Opens the floodgates for more corporate lobbying for tax incentives. Therefore, we propose that the San Miguel airport project, if it wants to seek tax incentives despite our objection, be subject to Create’s process and standards, which will soon be approved, ”he said.
According to the franchise bill approved by the Chamber, during the construction period of 10 years, the concessionaire will be exempt from each and every one of the direct and indirect taxes and fees of any type, nature or description, that emanate exclusively from the construction, development, establishment and operation of the airport and the airport city, including income taxes, value added taxes, percentage taxes, consumption taxes, documentary stamp taxes, customs duties and fees, taxes on real estate, buildings and personal property, business taxes, franchise taxes and supervisory fees, collected, established or collected, or may be collected, established or collected by any municipal, municipal, provincial or national authority.
After the 10-year construction period and during the remaining period of the franchise, the concessionaire will be exempt from income taxes and taxes on real estate, buildings and personal property, levied, established or collected, or may be levied, established or collected , by any municipal, municipal, provincial or national authority.
However, said exemption will expire as soon as the competent authority determines that the concessionaire has fully recovered its cost and investment expenses at the airport and in the Airport City, including financing and loan expenses. Then, the concessionaire will be subject to all taxes under the National Internal Revenue Code and the Modernization and Customs Tariffs Law.
