Hotels’ bid for tax perks rejected

Finance Secretary Cesar V. Purisima. AP FILE PHOTO

The Department of Finance shot down an appeal from a group of hotel owners for the revocation of a Board of Investments (BOI) rule that took away the income tax exemptions of it members.

Finance Secretary Cesar V. Purisima on Wednesday said that hotels and resorts in the country’s most popular tourist destinations did not need an income tax holiday (ITH) incentive.

Purisima was reacting to an open letter from the Philippine Hotel Federation Inc. (PHFI) asking President Aquino to revoke BOI Regulation No. 2013-001, which affected hotels and resorts in Metro Manila, Cebu City and the islands of Mactan and Boracay. The new rule provides that the tax exemption for such projects, if they apply for registration with the BOI through the 2012 Investment Priorities Plan, would cover only levies related to capital equipment and not income tax.

The BOI and the DOF are usually at loggerheads regarding tax perks. The DOF continues to push for a program to rationalize all fiscal incentives across industries, but this has so far failed to advance in Congress.

The income tax holiday “for already very profitable hotels serves only to further enrich a select few rather than improve the overall environment for tourism investments,” Purisima argued.

According to PHFI’s website, the following are represented in the group’s board of directors: The Bellevue Manila, Diamond Hotel Philippines, The Pan Pacific Manila, Holiday Inn Galleria Manila, Shangri-la Group, Ascott Makati, The Heritage Hotel Manila, El Nido Resorts, Ayala Group, The Peninsula Manila and Waterfront Group.

“We’d rather collect income taxes and invest in better infrastructure that will further attract more entities to invest in the Philippines,” Purisima added.

He said the tourism industry in those four geographic areas mentioned was strong enough that it would remain competitive even without the income tax holiday incentive.

Citing BOI data from 2009-2010, Purisima said the total average return on investments of the travel and tourism industry was 15 percent without the income tax perk.

He noted that more than half of the tourism-related projects for those two years were located in at least one of the four areas covered by the BOI regulation.

The same data also showed that the government might lose P1.06 billon in income tax revenue if projects in those four areas—in tourism as well as other industries—were exempted from paying income taxes.

“Indeed, factors referred to by PHFI itself as holding back our country’s tourism competitiveness potential—such as safety and security concerns, inadequate health and hygiene and underdeveloped ground transport and ICT (information and communication technology) infrastructure—may be addressed using tax revenues,” Purisima said.