(COFFEE TALK. BOC-Clark chief Maritess Martin presents pertinent laws governing freezones. Photo by Bong Lacson)
CLARK FREEPORT – The Bureau of Customs (BOC) Port of Clark is bound to apply the Tax Reform for Acceleration and Inclusion (TRAIN) Law because the Department of Finance (DOF) has yet to give instructions if freeports are exempted from its implementation.
This was the statement made by BOC Port of Clark District Collector Maritess Martin on Monday at the first “Kapihan” session of the Supply Chain Management Association of the Philippines–North Luzon Chapter (SCMAP-NLC) at the Xenia Hotel here.
“I raised that during our strategic planning. How about the free zones? They (DOF) said they are still looking into it, so for now we are applying it,” Martin said as she discussed the BOC’s five-point priority program, foremost of which is stopping corruption as outlined by Commissioner Isidro Lapena.
The Clark Investors and Locators Association (CILA) had initially expressed apprehension on the implementation of Package 2 of the TRAIN Law which covers investments.
During the forum, CILA president Frankie Villanueva discussed what “pro-active steps” were taken and presented to the DOF and other relevant government agencies to make the TRAIN Law fruitful to investors.
Villanueva said CILA also consulted with the Clark Development Corp. (CDC) which also expressed its concern.
“What we are waiting for is that draft and as soon as that draft is out we will announce it to everyone and have a workshop with locators from different ecozones on its possible effects and how it compares with our neighbors,” Villanueva said.
“Hopefully it will carry the spirit of TRAIN 2 to encourage more accelerated investments and inclusiveness,” he added.
Villanueva disagreed with the view that relevant provisions of Package 2 represented locator incentives as leakage in government income.
“The only principle we would like to suggest is competitiveness because all our neighbors are giving their incentives regularly,” he pointed out. “Competitiveness should be included in the principle fiscal incentives,” he added.
Villanueva proposed an income tax holiday of up to 10 years from the present five-year tax holiday.
“Singapore has 15 years and Vietnam is offering fiscal incentives until the project duration,” he said.
“If we want to be competitive, we should come up with something that will stand up with our neighbors.”
“What is happening is, even if you have income tax holiday for five years, for the first three years you cannot use those income tax because you are not making money yet. If you cannot carry over your losses it’s useless,” he noted.
He also said one of the reasons why we have very low investments here is there is no stability in policy.
He pointed out that the Philippines has suffered losses for not protecting contracts.
“We should protect contracts… We must take care of our existing clients as they are more important because they are here already,” he said.
Villanueva said small and medium enterprises (SMEs) under TRAIN 2 should also be linked with the global supply chain to achieve inclusiveness.
Villanueva acknowledged CILA chair Dr. Irineo “Bong” Alvaro, Jr. saying through his efforts, they were able to present our case to Senate President Aquilino “Koko” Pimentel III.
“The meeting was very fruitful because at the end of the session, Sen. Pimentel said the bottom line is whatever piece of legislation that will be passed, we must make sure it must be competitive,” Villanueva said.
The incentives that are being offered by our neighbors can be compared with what we have to off er to make sure we are competitive, he added. The corporate income tax (CIT) of 25 percent is highest but the average is only about 20 percent CIT in the ASEAN, he said.
“We strongly believe that giving a 12 percent CIT will not cause any shortages in collection because this will make collection more efficient,” Villanueva said.
On the value added tax (VAT) issue, Villanueva said a lot of locators support the local economy by buying from local suppliers. But initially, local suppliers were advised to start collecting VAT.
However, an advisory from the Philippine Economic Zone Authority (PEZA) after consulting with DOF categorically stated a “status quo” on VAT zero incentives.
“So, it is not an issue yet,” he said.
CILA supports the “Build Build Build” program of the national government because the lack of infrastructure is one of our Achilles heels, Villanueva said.
“We support the objectives of TRAIN which is for accelerated investments and inclusiveness. We are all for these things,” he added.
“In the meantime, we would like the DOF or the Bureau of Internal Revenue (BIR) to issue a clear statement.”
Also present at the forum were CDC senior vice president Eva Tejada and assistant vice president Atty. Noelle Meneses.