Government to earn P160-M from vessels flying RP flags

The government stands to earn at least P160 million this year in taxes from the operations of vessels flying Philippine flags, with the Filipino ship operators eyeing bigger revenues if they would be given access to local and foreign funds to finance the acquisiton of new ships.

Filipino Shipowners’ Association (FSA) president Carlos Salinas said the government’s total earnings from shipping operations of P80.2 million for January to June this year is expected to double by yearend to P160 million.

According to Salinas, revenue generated by the government from shipping operations can be increased if the Philippine merchant fleet expands which the Filipino shipowners can achieve through access to local and foreign funding to finance the acquisition of modern ships.

Republic Act 7471 or the Philippine Overseas Shipping Development Act of 1992 was intended to grant incentives to Filipino shipowners but the law limited the availment of the incentives to shipping companies directly carrying passengers or cargo, thus, depriving shipping companies engaged in other aspects of shipping operations from benefiting from the measure, Salinas pointed out.

"Chartering and even the sale of vessels which are part and parcel of shipping operations were excluded," he said, adding the country’s shipping companies which had resorted to charter in and charter out ships, due to their inability to modernize their fleet because of lack of financial funding, were unable to avail of the incentives.

FSA said another difficulty in sourcing foreign funds is the inadequacy of the country’s ship mortgage law. According to the group, the provisions of the 1978 Ship Mortgage Decree are now considered outdated and even unclear especially in the area of maritime liens.

FSA explained that a financier holding a ship mortgage has a lower priority claim than somebody who has a maritime lien. Because of these loopholes, FSA says ship financiers will not extend loans when their rights to recover the loan or to the ship by virtue of the loan if they have a lower preference in the satisfaction.

FSA had presented their concern to Transportation and Communications Secretary Leandro Mendoza with the commitment that given the support by the government, Filipino shipowners will be able to actively participate in the carriage of goods to and from the Philippines.

The group pointed out that in the year 2000 alone, the total trade of the Philippines was 67 million metric tons with a total paid freight of $4 billion. Out of the total, ships carried 66 million metric tons with $3 billion in freight payments. FSA pointed out that only four million metric tons out of the 66 million metric tons were carried by Philippine-flagged ships or only about 5.8 percent of the 99.2 percent of the trade volume carried by ships.

Salinas stressed that the laws that would provide the stimulus to promote the modernization of the Philippine merchant fleet need to be immediately amended, specifically the law which grants incentives to Filipino owners regardless of the type of shipping operations in which they are engaged in, as well as the Ship Mortgage Decree which will allow Filipino shipowners access to much needed local and foreign capital.

Salinas said that with more shipping companies and more ships, the government will be able to generate more revenue in the form of an increase in the 4.5 percent tax on bareboat, and an increase in dollar remittances from Filipino seafarers, thus assisting in the country’s balance of payments.