Senators warned against giving SMC tax perks for airport project

A private think tank urged senators to strike down the tax break they intended to award to San Miguel Corp. (SMC) for its P735-billion airport project, saying this would set a dangerous precedent and “opens the floodgates for more corporate lobbying.”

Action for Economic Reforms (AER) said the tax exemption provision in Senate Bill No. 1823, a bill filed just last month to give a unit of SMC a 50-year franchise for New Manila International Airport in Bulacan, ran contrary to the core objectives of President Duterte’s tax reform agenda by skipping the scrutiny of government regulators.

Exemptions

Under the bill, San Miguel Aerocity Inc. would be exempted from “any and all direct and indirect taxes and fees” during the project’s 10-year construction period.

The bill also provided that San Miguel Aerocity would be exempted from having to pay its income tax and taxes on real estate, buildings and personal property—unless a “competent authority” decides that the company has finally recovered its investment cost.

AER said the bill’s provision “sets a dangerous precedent where individual corporations will just approach Congress for tax perks, instead of going through the systematic fiscal incentives criteria that [Create] offers. It opens the floodgates for more corporate lobbying for fiscal incentives.”

The Corporate Recovery and Tax Incentives for Enterprises (Create) bill, which is also pending in the Senate, aims to cut taxes and rationalize tax incentives by giving them only to companies that meet certain standards.

“We thus propose that the San Miguel Aerocity Inc. airport project, if it wants to pursue tax incentives despite our objection, be subject to the process and standards of Create, which will soon be passed,” it added.

AER noted giving out fiscal incentives was only justified “whenever a failure in the market exists,” or in this case, when airports fail to address demand for air travel.

Gov’t facilities

Citing a 2016 study by Japan International Cooperation Agency, AER said enhancements in Ninoy Aquino International Airport and Clark International Airport would already address current and future demand for air travel in Metro Manila, Region III and Region IV-A.

“If a private sector proponent desires to build a new airport, absent a solicitation from government, it must bear the entire burden of risk of the project without government support. This is more compelling if the proposed airport will compete with two existing facilities owned by government,” AER said.

Aside from the provision of the Senate bill, the project is also currently registered under the Board of Investments, an investment promotion agency that gives tax breaks such as years of income tax holidays.