Olongapo SubicBay BatangGapo Newscenter

Saturday, September 17, 2005

Gov’t may condone taxes from locators at special ecozones

By LEE C. CHIPONGIAN, MB


The Department of Finance has proposed the condonation of taxes and duties that should have been charged to locators of special economic zones but only up to the date that the Supreme Court declared them no longer taxes and duties-exempt.



The ecozones declared by Republic Act 7227 or the Bases Conversation Development Authority include Clark Development Corp. and John Hay Management Corp. Section 50 of the law only said BCDA can establish ecozones but not as taxes and duty-free enterprises. Only the Subic Bay Metropolitan Authority is allowed its taxes and duty exemptions since it was created under a separate law.

In a letter sent to Senator Richard Gordon, Chairman of the Committee on Government Corporations and Public Enterprises, DoF Undersecretary Emmanuel Bonoan submitted proposals on the condonation of taxes and duties from the time the locators set up shop in the ecozones up to the period of the Supreme Court decisions in March and July this year.

The DoF suggested draft wordings to be used to "effect a condonation of certain taxes and duties as a curative measure to the tax problem of Clark and other ecozones arising from the Supreme Court decision."

The letter said that the proposed wordings incorporate the suggestions of the Bureau of Internal Revenue, the Bureau of Customs and the BCDA.

Taxes to be condoned are the difference between all national and local tax (such as the value added tax and business tax among others) and the five percent tax on gross income earned by the locators.

Not covered by the DoF proposals are taxes for the sale of goods to the local territory, which are still slapped VAT and other taxes.

The Supreme Court earlier ruled that Camp John Hay ecozone is not entitled to incentives unlike locators or companies in Subic Bay Freeport. These taxes that locators should have paid include the usual 33 percent corporate income tax instead of only the five percent tax on gross income.

At the moment there are two bills pending in congress and in the senate to rationalize the incentives and tax perks granted by the Board of Investments and the Philippine Economic Zone Authority.

The government has hundreds of revenue regulations giving tax incentives to various industries. These perks – such as preferential tax rates being enjoyed by export-oriented firms located in ecozones are now audited and reviewed by the DoF to tighten all its tax exemptions and incentives.

The finance department estimated earlier that foregone revenues from waived taxes and duties could have amounted to almost P200 billion in 2001 alone

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