SENATE ARRESTS UNCERTAINTY OF INVESTORS IN CLARK, JOHN HAY AND PORO POINT
Investors in the special economic zones established within the former U.S. baselands in Clark, John Hay and Poro Point received much needed reassurance that the issues regarding their tax incentives, which have been on the firing line for the past months, will be reconsidered by the government as the Senate Committee on Government Corporations and Public Enterprises continues its hearings and pronounces preliminary draft proposals.
During the hearing last Friday, the Senate Committee chaired by Senator Richard Gordon, with the assistance of the executive agencies headed by the Department of Finance and the Bases Conversion Authority, and the governing bodies of the affected special economic zones, reached a consensus to report out a bill that would extend a tax amnesty to the affected business enterprises.
Under the proposed tax amnesty, affected business enterprises could avail of the said amnesty by paying an amnesty tax rate of One Peso (P1.00) within one year from the effectivity of the law and would thereafter be free from any tax and duty liability over and above the 5% tax on gross income earned which such establishments had been previously required to pay in lieu of all other taxes.
It was, however, emphasized that the proposed tax amnesty would not include the applicable taxes and duties on goods removed from the special economic zones and introduced into the customs territory of the Philippines.
A separate bill to be reported out by Senator Gordon’s committee would amend RA 7227 to expressly provide that incentives under Republic Act No. 7916, the “Special Economic Zone Act of 1995”, would be available to business establishments in other special economic zones created under the RA 7227, including those affected by the recent Supreme Court decisions.
The efforts of Senator Gordon in working to find a workable legislative solution, together with Senators Enrile and Recto, were lauded by the Clark Investors and Locators Association represented in the hearing by Hans Axthelm who repeatedly expressed appreciation for moving the proposed legislative measures forward. Filadelfo Rojas, concurrent Chairman of the BCDA and of the Poro Point Development Corporation, added that the passage of the intended laws would ensure the immediate entry of investments in Poro Point projected to create as much as 2,000 new jobs.
In its recent rulings, the Supreme Court declared that the legislative intent of RA 7227 was to provide a regime of tax incentives only to the Subic Freeport and Special Economic Zone and not to extend such incentives to the other special economic zones to be established by executive proclamations under authority of the said law thereafter. It was held that, while the executive had the authority to establish such special economic zones upon concurrence of the affected local government units under the said law, no authority had been given to the executive to provide tax incentives within these zones.
Business enterprises within the special economic zones in Clark, John Hay and Poro Point which had been enjoying the tax incentives extended to them under the invalidated executive orders were faced with the possibility of assessment for back taxes by the government. Faced with possible unforeseen impositions as well as the removal of the tax incentives previously extended to them within these zones, a significant number of enterprises had threatened to close shop to do business elsewhere which, in turn, would have resulted in the loss of jobs for employees of these establishments.
Senator Gordon explained that the fact that the Clark Special Economic Zone alone had aggregate investments of 19 billion pesos with 350 investors/locators and 35,000 jobs deserved adequate recognition. The senator added that revoking the tax incentives already enjoyed by enterprises in Clark and the other affected special economic zones, as a result of a prior misstep of the executive, would once again do damage to our efforts at enticing foreign investors to do business in the Philippines and would, in effect, be “changing the rules in the middle of the game”.
The senator acknowledged the contributions of the different executive agencies who helped in crafting the language for his bills adding that it was such collaboration between the legislative and executive branches of the government that was vital to move our country forward and to send the right signals to existing and potential foreign investors on the resolve of our government to provide a climate conducive for healthy business.
During the hearing last Friday, the Senate Committee chaired by Senator Richard Gordon, with the assistance of the executive agencies headed by the Department of Finance and the Bases Conversion Authority, and the governing bodies of the affected special economic zones, reached a consensus to report out a bill that would extend a tax amnesty to the affected business enterprises.
Under the proposed tax amnesty, affected business enterprises could avail of the said amnesty by paying an amnesty tax rate of One Peso (P1.00) within one year from the effectivity of the law and would thereafter be free from any tax and duty liability over and above the 5% tax on gross income earned which such establishments had been previously required to pay in lieu of all other taxes.
It was, however, emphasized that the proposed tax amnesty would not include the applicable taxes and duties on goods removed from the special economic zones and introduced into the customs territory of the Philippines.
A separate bill to be reported out by Senator Gordon’s committee would amend RA 7227 to expressly provide that incentives under Republic Act No. 7916, the “Special Economic Zone Act of 1995”, would be available to business establishments in other special economic zones created under the RA 7227, including those affected by the recent Supreme Court decisions.
The efforts of Senator Gordon in working to find a workable legislative solution, together with Senators Enrile and Recto, were lauded by the Clark Investors and Locators Association represented in the hearing by Hans Axthelm who repeatedly expressed appreciation for moving the proposed legislative measures forward. Filadelfo Rojas, concurrent Chairman of the BCDA and of the Poro Point Development Corporation, added that the passage of the intended laws would ensure the immediate entry of investments in Poro Point projected to create as much as 2,000 new jobs.
In its recent rulings, the Supreme Court declared that the legislative intent of RA 7227 was to provide a regime of tax incentives only to the Subic Freeport and Special Economic Zone and not to extend such incentives to the other special economic zones to be established by executive proclamations under authority of the said law thereafter. It was held that, while the executive had the authority to establish such special economic zones upon concurrence of the affected local government units under the said law, no authority had been given to the executive to provide tax incentives within these zones.
Business enterprises within the special economic zones in Clark, John Hay and Poro Point which had been enjoying the tax incentives extended to them under the invalidated executive orders were faced with the possibility of assessment for back taxes by the government. Faced with possible unforeseen impositions as well as the removal of the tax incentives previously extended to them within these zones, a significant number of enterprises had threatened to close shop to do business elsewhere which, in turn, would have resulted in the loss of jobs for employees of these establishments.
Senator Gordon explained that the fact that the Clark Special Economic Zone alone had aggregate investments of 19 billion pesos with 350 investors/locators and 35,000 jobs deserved adequate recognition. The senator added that revoking the tax incentives already enjoyed by enterprises in Clark and the other affected special economic zones, as a result of a prior misstep of the executive, would once again do damage to our efforts at enticing foreign investors to do business in the Philippines and would, in effect, be “changing the rules in the middle of the game”.
The senator acknowledged the contributions of the different executive agencies who helped in crafting the language for his bills adding that it was such collaboration between the legislative and executive branches of the government that was vital to move our country forward and to send the right signals to existing and potential foreign investors on the resolve of our government to provide a climate conducive for healthy business.
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