TAX DEBATES on the much-awaited real estate investment trusts (REITs) have stalled the influx of the new instruments in the Philippines, including more than $1 billion in offerings to be sponsored by the country?s top property developers.

The tax framework on the REITs has long been discussed in Congress prior to the passage of the governing framework but the capital markets are now awaiting the issuance of the implementing rules and regulations on the tax treatment by the Bureau of Internal Revenue.

In a briefing during the REIT conference Wednesday, corporate lawyer and former Philippine Stock Exchange president Francis Lim, who was among the key proponents of the REIT law, said that the original intention was for the Philippines to come up with much more generous tax incentives to better catch up with the $600-billion REIT industry abroad.

But precisely because of the government?s large budget deficit, he said lawmakers pared down the sweeteners, although the final version has at least matched the tax framework in other countries.

?What they want is certainty on the tax consequences, which are not specifically addressed in the law,? said corporate lawyer Elizabth Opena of the QTE Law Offices. ?What the market wants is the certainty in the REIT regulation.?

While the law provides for a tax-free initial transfer of assets to the REIT, the debate is now on how the BIR would treat subsequent transfers of assets to the same REIT.

?I guess the concern is the immediate revenue losses that they foresee. They are worried about the budget deficit but we hope they will see the bigger picture, which is really the overall effect on the economy. New money will be invested, which means new employment and new compensation and there will be VAT [value-added tax] on the materials that we will use. All these if we add up will have a huge impact,? said Ayala Land Inc. chief finance officer Jaime Ysmael.

The Philippine REIT law allows publicly listed property developers to raise fresh funds by selling assets with recurring revenues, specifically by transferring these assets in a special purpose vehicle that could be listed on the stock exchange.