Airport perks seen opening door for legislated tax breaks

THE proposed tax perks for San Miguel Aerocity, Inc., a P740billion international airport in Bulacan, will set back the government’s tax reform program and may encourage other firms to also seek similar incentives via legislation, according to non-government organization Action for Economic Reforms (AER).

In a statement Thursday, AER Cofounder and Coordinator Filomeno S. Sta. Ana III said the proposal to give San Miguel Aerocity a 10-year exemption from direct and indirect taxes while it constructs the Bulacan airport could set a “dangerous precedent” as it may encourage other companies to go to Congress for tax incentives as well.

Senate Bill ( SB) 1823, which grants a 50-year franchise to the San Miguel Aerocity along with the tax perks, cleared the Senate Committee on Public Services Wednesday while its counterpart measure House Bill No. 7241 has been approved by the House of Representatives.

Mr. Sta Ana said the bill “runs contrary to the core objectives” of the government’s plan to streamline the country’s tax incentive system under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill.

“Legislating another tax incentive such as the provision in SB 1823 undermines the goal of CREATE. It 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,” he said.

“It opens the floodgates for more corporate lobbying for fiscal incentives,” he added.

He said the company should instead apply for tax breaks within the framework of the CREATE bill.

The CREATE bill seeks to cut the corporate income tax to 25% this year from 30% currently and reform the country’s tax incentive system to simplify it and make it time-bound.

Finance Assistant Secretary Maria Teresa S. Habitan said in August that the Department of Finance, which backs the CREATE bill, is “not okay” with the proposed grant of tax perks for the construction of Bulacan airport because it was an unsolicited bid.

Mr. Sta Ana said the attempt to gain incentives because of alleged market failure ignores the findings of a 2016 study by Japan International Cooperation Agency, which indicated that service improvements at Ninoy Aquino International Airport and Clark International Airport can accommodate future demand for air travel in the area surrounding the capital region.

“First and foremost, fiscal incentives can be justified whenever a failure in the market exists. In this issue, market failure is absent because current and future demand for air travel can be addressed by enhancing and expanding existing airports,” he said. He said the proposed Bulacan airport “will merely be competing” with the improved and expanded airport in Clark, Pampanga for the same passengers and could “create the conditions for market failure since two airports close to each other lead to suboptimal outcomes.”

“Second, the construction of the San Miguel airport is a private good… Yet it seeks government subsidy… The service it provides, from a public good perspective, is redundant. Hence, the government and the taxpayer should not shoulder the costs of this airport’s construction,” he said.

“If the private sector decides to build a new airport, it must shoulder the entire cost, and taxpayers must be spared from the burden,” he said. —