Challenge looms to San Miguel airport tax perks legislation

A GROUP of economists and former public officials said they will support a veto of legislation granting tax breaks for San Miguel Aerocity, Inc.’s P740billion Bulacan airport project if Congress passes the measure.

Action for Economic Reforms (AER) said in a statement Thursday that legislators reject Senate Bill 1823, which grants 10 years’ worth of tax exemptions over the airport’s construction period. The bill also gives San Miguel Aerocity a 50-year franchise.

“This bill, if passed, will supplant existing laws or future laws and that is very, very dangerous... not only for the economic rules but even for democracy. Imagine that, we are suppressing laws just to accommodate certain interests and in that context, we will indeed ask for a veto in the event that Congress approves this bill,” AER Cofounder and Coordinator Filomeno S. Sta. Ana III said in an online briefing Thursday.

Mr. Sta Ana said the group hopes the executive will seriously consider a veto but in case the measure is signed into law, “It will set a very bad precedent because even if this veto does not materialize, expect organizations like the AER to push for the rejection of this bill, or in the event that it becomes a law, a rejection of this law,” he said.

He said the measure, if passed, will undermine the government’s plan to reform the tax incentive system and may encourage other companies to ask Congress for tax incentives as well.

Deliberations on the bill in the Senate started early this week. A counterpart measure, House Bill No. 7241 has been approved by that chamber.

The President has 30 days from receipt of a bill passed by Congress to either sign it into law or veto it.

In absence of a signature or veto notice within the given period, the bill will lapse into law.

“What (incentives) you give to one private proponent, you have to give to everybody. It is better for all investors if they can follow a general law like CREATE and get their incentives in the general manner,” Rene Santiago, a transport expert and a former consultant for the Japan International Cooperation Agency (JICA), said in the same briefing.

In a statement last week, AER first warned that the proposal to provide tax perks “runs contrary to the core objectives” of the tax reform plan, currently embodied in the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) bill. The group also said the tax perks should be made available only in the event of market failure. In 2016, a study by JICA 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.

The Department of Finance also opposed the proposed tax incentives for the Bulacan airport because it is an unsolicited bid, which according to Finance Assistant Secretary Maria Teresa S. Habitan should not be given fiscal perks.

Mr. Sta Ana said the measure’s revenue impact is still difficult to assess at the moment.

Asked to comment, San Miguel Aerocity had not responded at deadline time.