Tuesday, September 22, 2009 | MANILA, PHILIPPINES [ BusinessWorld Online ]
THE HOUSE of Representatives has adopted in its entirety a Senate bill that seeks to convert the Bataan Economic Zone into a free port despite concerns from the Finance department, which claimed that this would result in revenue losses and smuggling.
Data from the House Bills and Index and the Finance department’s Research and Information Office showed that the House adopted Senate Bill 2118 last Sept. 16.
This effectively removed the need to convene a bicameral conference committee since the two chambers agreed to approve the measure passed by the Senate last Sept. 14.
The bill, which provides various tax perks to investors of the economic zone, will now need only the signature of the President before it becomes a law.
Once the Bataan economic zone is converted into a free port, goods that enter its jurisdiction will be exempt from the payment of duties as long as they stay there.
This incentive is not enjoyed by other economic zones, where only goods to be used in production are exempted from tariff.
The bill, which covers the economic zone located in the municipality of Mariveles, provides that locators will be entitled to the perks provided by Republic Act 8748, or the "Special Economic Zone Act of 1995" and the Omnibus Investment Code of 1987.
Incentives offered by the Special Economic Zone Act include the payment of 5% final tax on the gross income of establishments in lieu of all local and national taxes, except for real property taxes on land.
The Omnibus Investment Code of 1987, on the other hand, provides that an income tax holiday can be availed for at least four years, with a maximum of two-year extension if the investor puts in additional investments in the same activity.
The bill also states that any foreign national who invests at least $150,000 either in cash or equipment in a registered firm will be entitled to an investor’s visa under certain conditions.
The measure also forms a state-run firm, called the Authority of the Freeport Area of Bataan (AFAB), to manage the operations of the free port.
In a statement released last week, Sen. Richard J. Gordon, co-author of the bill, said the establishment of the Bataan free port "will generate more investments for the province which will help the government address the problem of increasing unemployment in the country."
"With its proximity to Metro Manila, the Freeport Area of Bataan will attract more foreign investors and has the potential of becoming a busy trade center in Asia once developed to its fullest, after a port that could service both local and international trade is successfully put in place," the statement quoted Mr. Gordon as saying.
But the Finance department has been opposing the measure, arguing this would deprive the government of its much-needed revenues and would complicate monitoring of smuggling.
"There should be a moratorium on the creation of more free ports in the county. The country does not need another free port to develop growth areas, but more infrastructure to be built by the National Government," the department said in a position paper last month.
"Free ports pose a huge challenge to customs authorities. They are being used for smuggling of goods that cause a heavy drain on our revenue stream and unfair competition to our domestic industry," it added.
The Finance department said the proposed free port, the sixth in the country and the third in Central Luzon, will result in revenue losses worth P5 billion a year.
The department had also opposed the creation of the AFAB, saying this would require capitalization and budgetary support which will take away funds from other concerns of the National Government.
It had also rejected a provision of the bill that reduced the National Government’s share from investors’ tax on gross income to 1% from the current 3%.
"The passage of another law creating a free port would dangerously set a new precedent, as there are a number of bills in the pipeline proposing the creation of economic zones with free port status," the Finance department said.
There are more than 20 economic zone bills now pending in Congress. — Alexis Douglas B. Romero
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