House panel approves tax perks for NMIA
The house Committee on Ways and Means on Wednesday approved the tax exemptions in the 50-year franchise bill granting San Miguel Corp. permission to put up the New Manila International Airport (NMIA) in Bulacan.
Albay Rep. Joey Sarte Salceda said his committee tackled the tax provisions of the substitute bill for the franchise, following earlier approval from the Committee on Legislative Franchises.
The new airport will be built in the coastal areas of Bulakan, Bulacan, around 30 kilometers north of Metro Manila. The plan is expected to decongest the Ninoy Aquino International Airport and support growth and development in Central
Luzon.
“The final report that came out of the tax committee, and following our own conversations with the House leadership, is significantly more tempered than the original. On its own, the project was already going to be beneficial, as a P740-billion infrastructure investment that will come entirely out of the private sector’s hands. That’s 4 percent of GDP,” Salceda said.
“In return, we are being asked to provide some tax concessions. By tempering the tax provisions, we made sure that the Filipino people will get even more economic benefits for less taxpayer cost."
Salceda added that by making the tax provisions “fairer,” the public will enjoy more returns from the project.
“I want this project to continue. But we need stronger guarantees of returns for the public,” he said during the committee hearing on Wednesday. “The Bulacan airport project will make a lot of money. Anything beyond the 12 percent rate of return—all goes to the government.”
Finance Assistant Secretary Teresa Habitan, however, thumbed down the proposal to grant tax incentives for the proposed Bulacan airport.
“Typically for unsolicited bid under the BOT [Built-operate-and Transfer] law, it says that government is now allowed to give subsidy, or guarantee or even equity. We are not supportive of giving the corporation or the unsolicited bidder any tax exemption and we have not done that in the past for all other PPP projects that have been approved and now being implemented,” Habitan said during the hearing.
Exemptions
UNDER the bill, during the term of the franchise and after a competent authority has determined that the grantee has fully recovered its investment cost, the grantee shall be entitled to generate income from the Airport City equivalent to a project internal rate of return (IRR). If the Airport City IRR exceeds 12 percent per annum, the grantee shall remit to the national government.
The bill also indicated that the Airport City IRR shall be reckoned and calculated within three months after the competent authority determined that the grantee has fully recovered its investment cost.
During the 10-year construction period, “the grantee shall be exempt from any and all direct and indirect taxes and fees of any kind, nature or description, which emanates exclusively from the construction, development, establishment, and operation of the airport and airport city.”
After the 10-year construction period and during the remaining term of the franchise, the bill indicated that the grantee shall be exempt from income taxes and taxes on real estate, buildings and personal property, levied, established or collected, or may be levied, established or collected, by any city, municipal, provincial or national authority.
However, the bill said such exemption from income taxes and taxes on real estate, buildings and personal property shall expire as soon as it is determined by competent authority that the grantee has fully recovered its investment cost and expenses on the airport and on the Airport City, including financing and borrowing expenses.
According to Salceda, it is critical that “all other income derived outside airport operations should be taxed regularly.”
“There will be hotels and restaurants in the surrounding ‘Airport
City,’ so we want to make sure that the franchise’s tax privileges only extend to the airport operations,” added the lawmaker.
Salceda said that the tax committee’s version “has made the final version more financially and economically beneficial to the Filipino people.”
“This is probably the biggest single-item investment in the country’s history. San Miguel is a Filipino company that has kept nearly all of its money here, to develop this country. They are doubling down on their commitment to Philippine development with this investment," he said.
“I want the airport to happen on fair and equitable terms. That is why I worked with the leadership and my colleagues to come up with fairer tax provisions for the franchise. I am proud to have pushed for fairer tax benefits and an attractive profit-sharing scheme for the country. But, bottom line, I want the airport to happen.”
Salceda’s tax committee has also promised the Committee on Legislative Franchises that they will look into the social impact on the communities directly affected by the project; the estimated foregone revenues due to the tax exemptions to be granted under the measure; the projected employment generation; and the determination of the ‘competent authority’ referred to in Sections 17 and 18 of the bill, which will decide when the tax exemptions will expire.
Private-public Partnership (PPP) Center Executive Director Ferdinand Pecson has assured the committee that the government will not have financial obligations to SMC.
Substitute bill
THE substitute bill seeks to grant San Miguel Aerocity Inc., a franchise to construct, develop, establish and operate and maintain a domestic and international airport in Bulakan, Bulacan and to construct, develop, establish, operate and maintain an adjacent airport in the city.
The grantee is also allowed to construct, acquire, own, lease, operate, develop and/or manage the Airport City and to conduct other businesses related to the airport. The company has the right to lease or sublease or assign interests in, and to collect and receive any and all income from toll roads, railroads and mass transportation systems connecting to the airport, advertising, car park, installation of cables, telephone lines, fiber optics or water mains, water lines and other business or commercial ventures or activities over all areas and aspects of the airport and the Airport City with commercial development potentials.
The franchise bill shall be in effect for a period of 50 years from the effectivity of the proposal, inclusive of the 19-year maximum period for the design, planning and construction of the airport and the Airport City, unless sooner revoked or cancelled.
The franchise is deemed ipso facto revoked in the event the grantee fails to comply with its conditions.
“The grantee shall not sell, lease, transfer, grant the usufruct of, nor assign this franchise or the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity, nor merge with any other corporation or entity, nor the controlling interest of the grantee be transferred, simultaneously or contemporaneously, to any person, firm, company, corporation, or entity without the prior approval of the Congress of the Philippines,” the bill read.
The company must also inform Congress of any sale, lease, transfer, grant of usufruct, or assignment of franchise or the rights and privileges acquired thereunder, or of the merger or transfer of the controlling interest of the grantee, within 60 days after the completion of said transaction.
The grantee, in accordance with existing laws and local ordinances, shall have the power to acquire either by purchase, negotiation, expropriation or condemnation proceedings, any private lands within or adjacent to the premises of the airport for the following purposes: acquisition and consolidation of lands for the development of the airport and the Airport City; and acquisition of right of way to the airport and the Airport City.