'Very hefty' incentives: Senate tackles San Miguel franchise to build Bulacan airport | Inquirer News
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‘Very hefty’ incentives: Senate tackles San Miguel franchise to build Bulacan airport

/ 09:22 PM September 30, 2020

MANILA, Philippines — Senators on Wednesday started deliberations on the franchise bid of San Miguel Aerocity Inc. that would allow its construction and operation of a domestic and international airport in Bulacan.

During the chamber’s plenary session, Senator Grace Poe defended the “very hefty” fiscal incentives granted under the franchise bill.

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First to interpellate Poe, who sponsored the franchise bill as chair of the Senate public services committee, was Senate President Pro Tempore Ralph Recto.

Recto pointed out that the incentives to be given to the franchisee are “more generous” than those given to private companies under the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE).

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With the passage of San Miguel Aerocity Inc.’s franchise, Poe noted that the construction of the airport would commence within a year and be completed in 12 years at no cost to the government.

After the 50-year lifetime of the franchise, the airport will be turned over to the government.

According to Poe, the franchise bill exempts the airport developer from all direct and indirect taxes and fees during its 10-year construction period.

After the construction period and during the remaining term of its franchise, she said the grantee would be exempted from income taxes and real estate taxes.

The exemption would cease upon a determination that the grantee has fully recovered its investment cost, said Poe.

Recto then asked Poe if the Department of Finance had agreed to the incentives to be granted under the franchise bill.

In response, Poe told her colleague that “numerous consultations” were held with the National Economic and Development Authority (NEDA) board.

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“We know that the Secretary of Finance is a member of the NEDA, so I suppose it passed through him,” she said.

Poe, meanwhile, stressed that the franchise bill seeks to pump-prime the economy “by providing special incentives because this is the biggest investment so far.”

“Their needs are very specific. So, since it’s a franchise, we take the opportunity now to tailor fit the incentive to their particular need so that if they succeed, we will obviously succeed as well,” Poe said.

Like a contract

Senate Minority Leader Franklin Drilon shared the same view as Recto, saying that the proposed incentives under the franchise measure would be “far superior” to the proposed incentives program under the CREATE bill.

Drilon raised the issue of whether the Fiscal Incentives Review Board (FIRB), which would be empowered by the CREATE bill to approve investors’ tax perks and oversee 13 investment promotion agencies (IPA) that give away tax incentives, would be able to revise the incentives proposed for San Miguel Aerocity Inc.

Responding to this, Poe surmised that the franchise measure “could take superior precedence over any other bill.”

“This should be more superior than the regulations that will be formulated by the FIRB,” she added.

Drilon agreed, noting that the franchise bill of San Miguel Aerocity Inc. is similar to a contract entered into between the grantee and the government through Congress.

“We are granting these (incentives) in consideration of substantial investment that the proponent is going to make. The powers of the FIRB are general in nature and it would not be proper to subject the will of Congress to the decision of the FIRB,” she said.

‘Very, very hefty benefit’

Senator Richard Gordon, who “strongly” supported the construction of the Bulacan airport, also took note of the incentives to be given to the developer should the franchise be approved.

He noted that the franchisee, during the airport’s construction period, will be exempt from income taxes, value-added taxes, percentage taxes, excise taxes, documentary stamp taxes, customs duties and tariffs, taxes on real estate, buildings and personal property, business taxes, franchise taxes, and supervision fees, levied, established or collected, or maybe levied, established or collected, by any city, municipal, provincial or national authority.

“That sounds like a very, very hefty benefit,” Gordon said.

Poe agreed with Gordon but pointed out that the incentives are “commensurate” to the risk also being taken by the private sector.

She said that in enacting the bill, Congress “deems the tax benefits to be granted under the franchise as acceptable incentives in order to attain the objectives of job creation, pump-priming and business activities stimulation, among others.”

She also added the surrounding areas of the airport will develop, thus, generating more taxes for the local government.

“Within the period that they’re still trying to recoup their investments, the airport will already be running. It will definitely decongest Metro Manila. There will be roads leading to the airport. A lot of our countrymen can find employment in the Bulacan area,” Poe said.

“The price of land is a little bit lower although it’s going up because of the development, therefore, people can actually choose to relocate and live there [as the] real estate taxes will go up,” she added.

“There’s always an upside for the government by giving these incentives for the airport to actually be built,” Poe further said.

‘Dream come true’

Senate Majority Leader Juan Miguel Zubiri joined his colleagues in supporting the construction of the airport.

“This project should have been built four years ago. We should have allowed them to build this four years ago at no cost government, not a single centavo lost by the government. We will have a world-class airport that will make us very proud,” Zubiri manifested.

Hailing from Bulacan, Senator Joel Villanueva expressed his support for the airport, which he described as a “dream come true” for the residents.

“We have been talking about this for quite some time,” he said.

“Imagine this project that will decongest our airports. At least generate one million jobs at no cost to the government,” Villanueva added.

Recto, likewise, welcomed the project.

“This is the biggest private sector investment ever in this country, more so now during a pandemic. It is most welcome,” he said.

“The incentives provided here are more generous, which is commensurate to the investment being undertaken. I do support this project,” Recto added.

The Senate temporarily suspended the period of interpellations for the said franchise bill to allow other senators to raise their concerns or comments.

The chamber is expected to approve the franchise of San Miguel Aerocity Inc. on second reading next Monday and approve it on third reading in a quick session on Thursday. [ac]

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