Recto: Senate won't pass tax measures
Recto: Senate won't pass tax measures
Updated 09:45pm (Mla time) Oct 05, 2004
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the October 6, 2004 issue of the Philippine Daily Inquirer
HERE is good news for Filipino taxpayers. According to Sen. Ralph Recto, who was a guest at the Kapihan sa Manila forum last Monday, the eight proposed tax measures, even if passed by Congress, will not improve the economic situation of the Philippines. Neither will they provide jobs to Filipinos nor improve their lives. Collections from these tax measures will only be used to pay our foreign debts. Therefore, they will benefit foreigners, not Filipinos, whose take-home pay will be less because of the tax bite.
So why is that good news? Because the tax measures will not improve the economic situation anyway, Recto said, he doesn't think the Senate will pass any of them, not even the increase in the sin taxes, and especially not the increase in the oil tariff because it is regressive. Recto is the chair of the Senate ways and means committee, so his words regarding taxes have a lot of weight.
So, without new taxes, where does he propose the government get the money to pay our foreign debt?
From better tax administration, he said. There are hundreds of billions of pesos in taxes out there waiting to be collected, he pointed out.
Not only does the government not collect the correct taxes but also refunds taxes to ghost companies that never paid any taxes at all, somebody commented.
Yes, the tax credit scam, Recto agreed.
And in spite of the scam, do you know that the government is still giving out tax credit certificates?
Giving tax credit certificates is not bad per se, Recto said. We have to honor commitments to investors. The mistake was in allowing the certificates to be sold to third parties. That gave smart operators an idea how to make a killing. If they were non-transferable, there would have been no tax credit scam.
What about the plan to remove the tax incentives given to investors in free trade zones like the locators in Subic?
The incentives should continue, he replied. We should honor our commitments. We can remove the incentives to incoming investors if we want, but not from those who are already here. We cannot change policies after the investors are already in, otherwise nobody would believe us anymore. Nobody would invest here anymore.
* * *
Not only will new investors not come in, but those that are already here are threatening to pull out, particularly many of those in the Subic Special Economic Zone because of alleged "high-handed moves" of government against them. Recently, the Bureau of Internal Revenue bared moves to impose new taxes on locators in Subic and disallow several of their incentives. That will put business viability in the area under peril, the locators protested.
Ichiro Tsuji, president of the Subic Techno Park, said recently that Japanese investors are "very disappointed" with the proposed changes, fearing that these will result in the "contraction of business activities inside the Freeport zone." Taiwanese investors are also "agitated" over the plan.
Under the Bases Conversion Law (RA 7227), investors in the special economic zones pay only 5 percent tax on gross income in lieu of all other taxes. They are also entitled to tax breaks on direct costs incurred in the conduct of their operations. But the BIR, really desperate for tax collections, revealed recently its intention to scrap the tax breaks on all administrative, selling and operating expenses even if these are incurred directly and exclusively in registered business activities.
"Foul!" cried the investors. You can't change the rules in the middle of the game. The changes would make the investors less competitive.
A large number of investors have made Subic the hub of their businesses because of several considerations: its location, the set-up, and the investment incentives. But while the Subic Bay Metropolitan Authority is working hard to lure investors through tax incentives, the BIR is working just as hard to restrict the beneficial effects of these incentives to generate the needed revenues--a case of the left hand not knowing what the right hand is doing.
They are not seeking tax exemptions, the investors said. But they deserve respect, fairness and consistency in the application of rules that directly affect them.
But the government desperately needs more money to pay its debts, 'di ba? Yes, but crisis or not, fairness and consistency are the values by which government can command the respect of investors and the public.
* * *
Still on the subject of fair play in the rules affecting business, the government has changed its mind on a rule in the bidding, scheduled late this month, for the sale of Napocor's coal-fired Masinloc power plant in Zambales. Foreign investors have denounced a provision which states that any winning bid by a foreign company may be matched by a Filipino-owned company, which will then be proclaimed the winner.
"Foul again!" howled the foreign investors. This is unfair, discriminatory and grossly disadvantageous to them who spend a lot of money to conduct studies and due diligence on the facility to be sold so that they can determine the right price, they said.
Among the foreign bidders are Marubeni of Japan, Kepco of Korea, YNN of Australia, YTL of Malaysia and the Atlanta-based Mirant. The lone Filipino bidder is First Generation Holdings of the Lopez Group.
I reported all these in my Sept. 27 column. Two days later, the Power Sector Assets and Liabilities Management Corp., the government agency tasked with disposing of Napocor's assets, removed that controversial provision.
Updated 09:45pm (Mla time) Oct 05, 2004
By Neal Cruz
Inquirer News Service
Editor's Note: Published on page A14 of the October 6, 2004 issue of the Philippine Daily Inquirer
HERE is good news for Filipino taxpayers. According to Sen. Ralph Recto, who was a guest at the Kapihan sa Manila forum last Monday, the eight proposed tax measures, even if passed by Congress, will not improve the economic situation of the Philippines. Neither will they provide jobs to Filipinos nor improve their lives. Collections from these tax measures will only be used to pay our foreign debts. Therefore, they will benefit foreigners, not Filipinos, whose take-home pay will be less because of the tax bite.
So why is that good news? Because the tax measures will not improve the economic situation anyway, Recto said, he doesn't think the Senate will pass any of them, not even the increase in the sin taxes, and especially not the increase in the oil tariff because it is regressive. Recto is the chair of the Senate ways and means committee, so his words regarding taxes have a lot of weight.
So, without new taxes, where does he propose the government get the money to pay our foreign debt?
From better tax administration, he said. There are hundreds of billions of pesos in taxes out there waiting to be collected, he pointed out.
Not only does the government not collect the correct taxes but also refunds taxes to ghost companies that never paid any taxes at all, somebody commented.
Yes, the tax credit scam, Recto agreed.
And in spite of the scam, do you know that the government is still giving out tax credit certificates?
Giving tax credit certificates is not bad per se, Recto said. We have to honor commitments to investors. The mistake was in allowing the certificates to be sold to third parties. That gave smart operators an idea how to make a killing. If they were non-transferable, there would have been no tax credit scam.
What about the plan to remove the tax incentives given to investors in free trade zones like the locators in Subic?
The incentives should continue, he replied. We should honor our commitments. We can remove the incentives to incoming investors if we want, but not from those who are already here. We cannot change policies after the investors are already in, otherwise nobody would believe us anymore. Nobody would invest here anymore.
* * *
Not only will new investors not come in, but those that are already here are threatening to pull out, particularly many of those in the Subic Special Economic Zone because of alleged "high-handed moves" of government against them. Recently, the Bureau of Internal Revenue bared moves to impose new taxes on locators in Subic and disallow several of their incentives. That will put business viability in the area under peril, the locators protested.
Ichiro Tsuji, president of the Subic Techno Park, said recently that Japanese investors are "very disappointed" with the proposed changes, fearing that these will result in the "contraction of business activities inside the Freeport zone." Taiwanese investors are also "agitated" over the plan.
Under the Bases Conversion Law (RA 7227), investors in the special economic zones pay only 5 percent tax on gross income in lieu of all other taxes. They are also entitled to tax breaks on direct costs incurred in the conduct of their operations. But the BIR, really desperate for tax collections, revealed recently its intention to scrap the tax breaks on all administrative, selling and operating expenses even if these are incurred directly and exclusively in registered business activities.
"Foul!" cried the investors. You can't change the rules in the middle of the game. The changes would make the investors less competitive.
A large number of investors have made Subic the hub of their businesses because of several considerations: its location, the set-up, and the investment incentives. But while the Subic Bay Metropolitan Authority is working hard to lure investors through tax incentives, the BIR is working just as hard to restrict the beneficial effects of these incentives to generate the needed revenues--a case of the left hand not knowing what the right hand is doing.
They are not seeking tax exemptions, the investors said. But they deserve respect, fairness and consistency in the application of rules that directly affect them.
But the government desperately needs more money to pay its debts, 'di ba? Yes, but crisis or not, fairness and consistency are the values by which government can command the respect of investors and the public.
* * *
Still on the subject of fair play in the rules affecting business, the government has changed its mind on a rule in the bidding, scheduled late this month, for the sale of Napocor's coal-fired Masinloc power plant in Zambales. Foreign investors have denounced a provision which states that any winning bid by a foreign company may be matched by a Filipino-owned company, which will then be proclaimed the winner.
"Foul again!" howled the foreign investors. This is unfair, discriminatory and grossly disadvantageous to them who spend a lot of money to conduct studies and due diligence on the facility to be sold so that they can determine the right price, they said.
Among the foreign bidders are Marubeni of Japan, Kepco of Korea, YNN of Australia, YTL of Malaysia and the Atlanta-based Mirant. The lone Filipino bidder is First Generation Holdings of the Lopez Group.
I reported all these in my Sept. 27 column. Two days later, the Power Sector Assets and Liabilities Management Corp., the government agency tasked with disposing of Napocor's assets, removed that controversial provision.
posted by Dante at 12:00 AM
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