Congress urged to restore tax perks of ecozone investors

The Joint Foreign Chambers of the Philippines yesterday urged Congress to complete work on two bills that would improve the investment climate for Clark and other special economic zones.

The Joint Foreign Chambers expressed their support for House Bill 5064 which would restore tax privileges to investors at the Clark, John Hay, Morong and Poro Point special economic zones.

The bills are intended to correct a problem identified in the July 29, 2005 decision of the Supreme Court which ruled that specific legislation was needed to grant tax privileges to investors locating at the Clark, John Hay, Morong and Poro Point special economic zones.

The Supreme Court ruled that several executive proclamations granting the SEZs investment incentives parallel with those given for Subic under the Bases Conversion and Development Act of 1992 (RA 7227) were not a sufficient tax authority.

To correct what would otherwise be unfair treatment of existing investors who located in good faith at these zones and to encourage future investment, Congress considered two remedial bills which President Arroyo certified as urgent on Feb. 3, 2006.

President Arroyo last  March 10, 2006, had signed Proclamation 1035 extending PEZA incentives to locators at Clark.      

On May 31, 2006 the House approved HB 4900 and HB 5064.

HB 5064 brings Clark and SEZs at other former bases under the BCDA Act and authorizes incentives under the Special Economic Zone Act of 1995 (RA 7916) including income tax holidays.

HB 4900 removes any tax liability for locators at these zones created as a result of the Supreme Court decision.

The group supports HB 5064, which will extend the same incentives for investors at Clark, Subic and the other former military bases which are now being granted to investors at all export zones under the PEZA.

According to the Joint Foreign Chambers, HB 5064 would equalize incentives at all special economic zones and simplify the investment location decision for foreign investors in the future.

Under HB 5064, the same incentives may be granted uniformly at all SEZs in the Philippines.

The bill passed in the Senate (SB 2260) does not allow for income tax holidays at Clark, Subic and the other former military base SEZs.

It thus creates an unfortunate disparity that would hinder future investment at the five SEZs and potentially favor other SEZs which may enjoy more attractive incentives.

The JFC argued that they know of no government in ASEAN which offers foreign investment income tax holidays to investors locating at some, but not all of the country’s SEZs.

SB 2260 also creates a cumbersome and unnecessary bureaucratic process for export enterprises to pay VAT on their imported raw materials and capital equipment and to have the VAT paid refunded after presentation of proof of export.

The Joint Foreign Chambers is composed of the members of the  American Chamber of Commerce of the Philippines, Australian-New Zealand Chamber of Commerce of the Philippines, Inc., Canadian Chamber of Commerce of the Philippines, Inc., European Chamber of Commerce of the Philippines, Inc., Japanese Chamber of Commerce and Industry of the Philippines, Korean Chamber of Commerce of  the Philippines, Inc.  and the Philippine Association of Multinational Companies Regional Headquarters, Inc.