Tax perks for Bulacan airport project backed
The tax perks being considered for the San Miguel Corp. (SMC)-led New Manila International Airport project will result in at least P38 billion in forgone revenue for the government, but Albay Rep. Joey Salceda on Friday said the gains from the conglomerate’s P740-billion investment would take precedence.
Asked by the Inquirer Friday how much would the foregone revenue be from the fiscal incentives to be extended to the planned “aerotropolis” in Bulacan, as approved by the House ways and means committee last Wednesday, its chair Salceda replied: “Around P38 billion in national revenue from the period of construction, and around P1.5-2 billion annually once the airport begins to operate.”
SMC subsidiary San Miguel Aerocity Inc. will be given tax exemption on half of its profits in excess of a 12-percent profit margin and all profits above 14 percent, among other tax incentives, if the House measure becomes law.
“Let me remind you, however, that most of this is notional. If the airport doesn’t happen, much of this would not be raised in the first place,” Salceda said in a text message.
The Department of Finance (DOF) did not have its own estimates of potential foregone revenues as of Friday.
“Considering the P740 billion in new direct construction spending that this airport will create, the appreciation in real property values in the region, the new jobs and downstream development that the new airport will create, and the returns to government above the 12-percent profit margin, the fiscal cost is worth it. We can’t build it ourselves with that fiscal cost, for sure,” Salceda said.
“The original bill, House Bill No. 7241, is even more generous and expansive. Before the committee deliberations, I urged the House leadership to adopt some revisions: One, ring-fence the grantee. Two, divide the ecozone and the franchise provisions into two bills. Three, ensure that the grantee is subject to the normal taxes once they recover the investment costs. Four, anything above the 12-percent profit margin should go to the government. And five, no GIE (gross income earned) on the ecozone—my stand on this issue is already well-known and consistent. The first four recommendations were adopted and the fifth will be considered during the ecozone deliberations,” Salceda added.
Salceda said he “didn’t want to say no to this project—I want this investment to happen.”
“But I also could not affirm some of its original tax provisions. That said, I would like to advise my colleagues in the House leadership, and our counterparts in the executive, that we cannot afford to be ideological during a crisis. I am a fiscalist. Under normal conditions, I almost always align with our tax authorities. But, the size of the economic crisis, the size of this investment and the size of its potential benefits are clearly not normal,” according to Salceda.
Salceda, who was backing the DOF’s push for the proposed corporate recovery and tax incentives for enterprises act, said the Duterte administration’s second tax reform package needed the flexibility to attract “elephant-sized investments.”
“This airport is a blue whale —and it’s from a domestic investor, so we do not even need to cede tax privileges to a foreign company. I hope we can come to an agreement on the final provisions,” Salceda said.
The latest DOF data included in 2021 budget documents showed that in 2018, the government gave away P477.2 billion in tax incentives.
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