Clark traders study impact of proposed TRAIN 2

CLARK FREEPORT—The Clark Investors and Locators Association (Cila) has commissioned a study to determine the impact of the proposed second stage of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.

The working draft of TRAIN 2 was presented to Cila last week by the Department of Trade and Industry but it made no reference to the 5-percent gross income earned (GIE) that the Clark economic zone collects from businesses in lieu of taxes, Cila president Francisco Villanueva told the Capampangan in Media forum on Friday.

Cila urged Congress to include a provision in the second tax measure that would honor contracts exempting them from certain taxes.

Respect contracts

“We suggested a respect of contracts,” Villanueva said, adding that the GIE incentive was provided by Republic Act No. 9400, the law that amended the Bases Conversion and Development Act (Republic Act No. 7225).

The proposed TRAIN 2 focuses on corporate tax reforms. The TRAIN Act (Republic Act No. 10963) imposed excise taxes on fuel and products containing sugar and had been blamed for the escalation of commodities, fuel prices and inflation.

Villanueva said manufacturers prefer the GIE to maintain competitive prices for products that they export.

The government converted Clark into an economic hub after the Senate rejected an extension of the 1947 Military Bases Agreement in 1991. The Senate decision paved the way for the closure of bases and pullout of American troops.

Incentive

Lease contracts in Clark are effective for 25 years with options to renew for another 25 years.

Income tax holidays are not offered in Clark but Cila said this form of incentive should at least be extended to 10 years in principle.

Cila also urged Congress to apply the “cross-border doctrine” in enforcing the value added tax (VAT) system, which would allow local enterprises supplying businesses inside ecozones to refund the VAT.

Cila recommended a 15- to 20-percent increase in corporate income tax in 2022 instead of the proposed 30 percent to ensure competitiveness. It also pushed for a provision stipulating that all net operating losses should be carried over in future tax deductions. —Tonette Orejas