Clark ecozone placed under PEZA jurisdiction

CLARK FIELD, Pampanga — President Arroyo has signed Proclamation No. 1035 declaring anew some 33,000 hectares of this former US military base and reservation as a special economic zone.

This, as a petition remains pending with the Supreme Court appealing its earlier verdict denying Clark investors of special tax privileges which their counterparts at the Subic Bay Freeport are enjoying.

The proclamation paved the way for the signing yesterday of an agreement between the Clark Development Corp. (CDC) and the Philippine Economic Zone Authority (PEZA) entitling some 300 investors here of tax and other privileges similarly enjoyed in other PEZA areas nationwide.

In the proclamation she signed last March 10, the President cited a recommendation of the PEZA board of directors for Clark Field to become an economic zone entitled to tax privileges, which the Supreme Court has denied.

On July 29 last year, the Supreme Court ruled that Clark investors were not entitled to the same tax perks enjoyed at the Subic Bay Freeport.

The tribunal ruled that Republic Act 7227, or the Bases Conversion Act, which converted former US military bases into special economic zones, referred only to Subic.

Despite this ruling, the Bureau of Internal Revenue (BIR) and the Bureau of Customs, however, withheld imposing the usual taxes on Clark investors amid fears that they would either shut down or relocate to other countries, thus resulting in massive layoffs. Some 300 Clark firms are employing about 37,000 people.

Under the proclamation, PEZA tax and other privileges would cover the Clark areas cited in Proclamations 163 and 805, both issued by former President Fidel Ramos.

Proclamation No. 163 identified 28,041 contiguous hectares in Clark as an economic zone.

Proclamation No. 805 added 5,724 hectares of the so-called Sacobia area as part of the ecozone.

From the very start, Clark investors have been remitting only five percent of their gross income earned to the BIR in lieu of corporate and other regular taxes imposed on other businesses, and have been exempted from import duties on raw materials.

Earlier, Clark Development Corp. (CDC) president and chief executive officer Antonio Ng wrote PEZA director general Lilia de Lima, asking that some 36,000 hectares of land in Angeles City, Mabalacat, and Porac in Pampanga and Capas and Bamban in Tarlac be declared a PEZA economic zone "to be known as the Clark special economic zone."

Two House bills — 4901 and 4900 — remain pending despite the clamor by Central Luzon officials and investors for their passage to remove the cloud of "insecurity" triggered by the Supreme Court decision.

The bills propose amendments to RA 7227 so that Clark and other former US military bases, which have been declared economic zones, could be granted tax privileges similarly enjoyed at the Subic Bay Freeport.

The twin bills, if approved, would also grant tax amnesty to the investors since the Supreme Court, in its decision, implied that they were supposed to pay regular taxes retroactively.

While Clark investors were elated by Proclamation No. 1035, they expressed hope that the twin House bills would be passed.

They argued that PEZA’s jurisdiction of Clark could trigger questions on the autonomy of the state-owned CDC in running the affairs of the ecozone.

Under PEZA, new Clark investors would be entitled to an income tax holiday for four years, extendable to a maximum of eight years.

After this period, they have the option to pay a special five percent tax on gross income in lieu of all national and local taxes.

They are also exempt from duties and taxes on imported capital equipment, spare parts, supplies, raw materials, breeding stocks and genetic materials, or the equivalent tax credit on these items when sourced locally.

The PEZA would also exempt them from wharfage dues and export taxes.