Resolve ecozones’ back taxes, Congress urged

The Bureau of Internal Revenue (BIR) is urging Congress to resolve the issues of uncollected back taxes of special economic zones.

"Congress has to do something about the uncollected back taxes of these economic zones before they become a liability to all of us. A quick resolution is required to plug what could be a bigger problem in the future," said Customs Commissioner Jose Mario Buñag.

The Supreme Court (SC) had voided the tax perks given to foreign locators saying this privilege must be locator-specific. The incentives were granted based on provisions allowed under the existing Bases Conversion and Development Act of 1992 which authorized the creation of special economic zones through presidential proclamations.

Buñag said that with the SC ruling, Congress is trying to remedy these through tax amnesties or condonation.

He said there are already at least two proposed legislative measures to ensure that even with the SC ruling, foreign investors would stay in the Philippines.

These include House Bill 4901, which would grant the locators tax incentives equal to those already given in special economic zones.

Another proposal under House Bill 4900 will give the same locators rebuffed by the SC – a tax reprieve or amnesty.

One of the problematic special economic zones is the Clark Special Economic Zone in Pampanga which was asked to pay P304.521 million in back taxes but their case is on appeal.

On the general issue of zone locator taxes, government decided to leave unpaid taxes along and will instead resolve the problem through legislative means.

The economic cluster recently decided to stop legal issues by not forcing ecozone locators to pay taxes and duties. This move was a reprieve for locators at the Camp John Hay complex in Baguio who owe government about P72 million in taxes.

Last week, Finance Secretary Margarito B. Teves met with the other members of the cluster on concerns the SC decision throwing out the tax-exempt status of locators inside Camp John Hay would send mixed signals to investors.

The legal problems started when the SC declared in March last year that locators inside Camp John Hay, Clark, Poro Point Freeport and the Morong Special Economic Zones were illegally granted tax exemptions.

The Department of Finance has proposed the condonation of taxes and duties that should have been charged to locators of special economic zones but only up to the date that the SC declared them no longer taxes and duties-exempt.

The ecozones declared by Republic Act 7227 or the Bases Conversation Development Authority (BCDA) includes Clark Development Corp. and John Hay Management Corp.

Section 50 of the law only said BCDA can establish ecozones but not as taxes and duty-free enterprises. Only the Subic Bay Metropolitan Authority is allowed its taxes and duty exemptions since it was created under a separate law.

The SC ruled that Camp John Hay ecozone is not entitled to incentives unlike locators or companies in Subic Bay Freeport. These taxes that locators should have paid include the usual 33 percent corporate income tax instead of only the five percent tax on gross income.