Olongapo SubicBay BatangGapo Newscenter

Saturday, January 28, 2006

C. Luzon bloc supports bills on Clark ecozone tax perks

By Dante M. Fabian, SunStar

CLARK ECOZONE -- About 20 congressmen from the Central Luzon bloc are supporting the passage of two bills now pending in the House of Representatives, which grants tax amnesty and duty free incentives and privileges to locators and investors in Clark Special Economic Zone (CSEZ) and Camp John Hay.

Sponsored by Tarlac Third District congressman Jesli Lapus, House Bill (HB) 4900 and 4901 gained the support of the 20 Central Luzon congressmen in support of the economic agenda of President Gloria Macapagal-Arroyo for Clark ecozone, which is now being promoted as the primary growth engine in the region.

Lapus, as chairman of the Congress ways and means committee, sponsored the bills in order to protect more than 36,000 employees in Clark that may be displaced due to investors' pullout.

HB 4900 calls for the declaration of a one-time amnesty on tax and duty free liabilities, including fines, penalties and interests incurred by locators inside special economic zones and freeports, while HB 4901 calls for the amendments to Republic Act (RA) 7227 or the Bases Conversion and Development Act of 1992.

Clark Development Corporation (CDC) president Antonio R. Ng expressed optimism that more congressmen will join the CL bloc in approving the ecozone tax incentives and amnesty bills to manifest their concern for the fate of employees in Clark who will lose their jobs, should government fail to honor tax incentives and duty free privileges of the investors inside the economic zone here.

"With the approval of the two House Bills, the locators and investors in Clark will be assured that the incentives being provided to them will be honored and this will prevent them from scouting other areas for their continued operations," Ng said.

A couple of weeks ago, Ng succeeded in dousing efforts of Mabalacat local government officials led by Mayor Marino "Boking" Morales and Vice Mayor Crisostomo Garbo from collecting local government taxes from investors in the Clark ecozone.

Ng said the move was premature as the Clark Investors and Locators Association (Cila) filed a motion for reconsideration, which is still pending, against the Supreme Court (SC) decision.

The explanatory note of the Lapus bill states: "As a curative legislative measure, this bill seeks to amend RA 7227, as amended, to clearly provide for incentives to investors in Clark and other special economic zones created or to be created under this law."

Lapus stressed that HB 4901 intends to extend the incentives provided for in RA 7916 to provide uniformity of perks to investors.

The SC, on July 29, ruled that RA 7227 expressly provides for the grant of incentives only to companies located inside the Subic Bay Freeport and not in Clark Ecozone, Poro Point in La Union and Camp John Hay in Baguio City.

Lapus' bill noted that the high tribunal's ruling has steered uncertainty among big investors, and expressed fear that development of special ecozones created under the RA 7227 would come to a halt as investors would locate elsewhere.

"Because this unexpected development has been perceived as suddenly changing the rules in the middle of the game, some investors have threatened to shut down operations and lay off workers, with some already contemplating to leave the country." Lapus said.

CDC public relations manager Angelo C. Lopez, Jr. said in Clark alone, there are more than 350 investors which include American firms such as giant courier United Parcel Service, Japanese tire maker Yokohama, British-owned Rolls Royce, among others. Lopez said most of the firms have expressed apprehension on the lifting of tax incentives and duty free privileges and even expressed intention to pull out and invest elsewhere should there be no remedial measures on the ruling of the SC.

The revocation of the incentives would require Clark locators to pay the normal corporate income tax rate of 32 percent instead of the preferential rate of 5 percent on gross income, and would be assessed back taxes for the number of years they have been operating in the Clark Ecozone or in Poro Point in La Union.

The House move came as a relief after American and other foreign investors called on Congress to expedite the passage of the bills to prevent firms inside Clark from transferring their operations elsewhere.

"The removal of the tax incentive under which they located and any determination of tax liability for prior periods would have serious negative consequences," American Chamber of Commerce (AmCham) executive director Robert Sears said in a statement.

"It could cause these firms to reconsider their decision to invest in the Philippines, possibly leading to decisions not to expand operations or even to withdraw and relocate to other locations or depart from the Philippines."

"Not only would operations of existing investor-locators be in jeopardy, but future investors would also be deterred because of the unpredictability of fiscal incentives. The loss of real jobs and spending would be considerable, but this would be much less than the loss of the potential creation of jobs and spending."


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