Clark investors restive over SC ruling on taxes

CLARK FIELD – Investors here are restive, with some of them threatening to relocate, in light of the recent Supreme Court decision stopping the sale of duty-free goods here to persons who are not from Clark or who do not enjoy tax-free privileges.

Locators in this former US military base are asking the high court to reconsider its adverse decision handed down last July 29 on petition of several merchants outside Clark protesting the unfair competition, they said, posed by duty-free shops here.

Many of the 330 or so locators here are not selling any product but are in manufacturing, assembly or the services business. But they have been disturbed by the SC ruling for fear that even those not engaged in duty-free shop operations may be affected.

The worst scenario being painted by nervous investors is that they may have to close, throw their workers out and move to other countries, such as Vietnam and China that offer better incentives, including tax holidays, to foreign investors.

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KAPIHAN NOTES: The decision, penned by Associate Justice Adolfo S. Azcuna, spiced the discussion yesterday at the weekly Kampus Kapihan at the Angeles University Foundation where some participants heard about it for the first time.

Romeo P. Yusi Sr., Region 3 director of the Philippine Chamber of Commerce and Industry Inc., conveyed to the Kapihan crowd the anxiety of Clark locators and the possibility of mass layoff of workers.

Yusi said pullout of investors could derail the ambitious development plans for Central Luzon woven around the former miltary base converted into a special economic zone operating in tandem with Subic in Zambales, after which the Clark economic zone was patterned.

He expressed hope that the Supreme Court will consider also the adverse economic impact of its decision, particularly on the country’s being able to attract and keep foreign investors.

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TOTAL PACKAGE: Another Kapihan resource speaker, Fidel M. Arcenas, who is provincial administrator of Pampanga, talked of the wider perspective of the province offering a "comprehensive investment package" for investors choosing sites outside Clark.

Arcenas said there was something unhealthy about investors in Clark enjoying privileges, such as tax exemptions, that are denied businessmen outside.

He pointed to the need for leveling the field if the entire province, and not just Clark and its adjoining towns, is to grow in a manner that would benefit all residents and not just a few.

Under RA 7227 enacted in 1992 for the "sound and balanced" conversion of Clark and Subic into special economic zones, local and national taxes are waived within the zones, obviously as an incentive to investors.

Investors are also allowed duty-free importation of raw materials, capital goods, and equipment needed for their operation.

The legality of such duty-free importation was upheld in the SC decision, but the court struck down that portion of Executive Order No. 97-A extending the tax-exemption to persons and businesses outside the secured sections of Clark and Subic.

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PURE GOLD: During the early days of duty-free-shopping at Subic and Clark, outsiders had to secure proxy shopping cards endorsed by bona-fide residents aged 15 years or older to be able to buy consumer goods (not heavy stuff such as appliances) with a cumulative value of $100 per month per person.

When such restrictions were lifted (actually disregarded by duty-free shop operators hungry to make sales with the connivance of customs inspectors), merchants outside the bases cried foul.

Another curious detail is that some duty-free shops with connections have been able to branch out to Metro Manila, which is clearly outside the special economic zones enjoying tax and duty privileges under the law.

Why this obvious anomaly? It is like picking pure gold off the streets.

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WINDFALL: In lieu of paying duties and taxes, businesses in the zones are required to remit 3 percent of their gross income to the national government, and 1 percent each to adjoining local government units in proportion to their population and area.

In addition to these mandatory contributions, businesses in the zones must contribute another 1 percent to a development fund to be used for municipalities contiguous to the base areas.

In the case of Clark, the beneficiaries are Angeles City, the towns of Mabalacat and Porac in Pampanga, and Capas in Tarlac.

Mabalacat may look sleepy except for its busy barangay of Dau, but thanks to Clark locators, it now has one of the biggest incomes among the towns of Pampanga, rivaling even that of Angeles and San Fernando the capital.

With such windfall, residents and passers-by are asking why Mabalacat officials have neglected the repair or upgrading of the one-kilometer road connecting the town proper to the North Luzon Expressway in barangay Sta. Inez.

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SM MALL DUE: Asked about the Clark business climate after the Kapihan, Yusi (who is also chairman of the Metro Angeles Chamber of Commerce and Industry Inc.), said one major development is the opening next year of another SM City mall near the Clark main gate in Balibago.

Yusi ventured the opinion that majority of Angeles residents favor the SM City-Clark project as, he said, its operation would bring more benefits to local folk than it would inflict damage to local commerce.

"I likewise welcome all malls, supermalls, and any commercial-industrial establishments in our area, be it Robinsons, Nepo Mall, Makro in Mabalacat or any other kind," he added, "because these will mean more employment."

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OPPOSITION: Oppositors to SM City-Clark, mostly businessmen expecting tough competition, have assailed supporters of the project for having "betrayed the business sector in this city."

Yusi said SM’s opening next year would mean direct employment for at least 2,400 persons within two to three years. In addition, he said, around 10,000 in direct jobs are being created by the construction of the project.

The SM management, he said, has agreed to advance payment of P75 million to be divided by the Clark Development Corp. into: P18 million for the expansion of the road at First Street to four lanes and the remainder of P57 million for the airport.

The SM Clark project would cover a 16-hectare site near the Balibago gate, a third of which would be open space. The site would be leased by SM for P70 million a year for 25 years, renewable for another 25 years.

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TAX-PAID GOODS: SM Clark has agreed to develop at its own expense the Bayanihan Park between the main gate and the MacArthur highway as well as the terminal for passenger vehicles now using the area as a makeshift terminal.

The mall would sell only tax-paid items and not duty-free goods, allaying fears that it would flood the market with duty-free imported items that would compete with local goods.

Yusi said the reported tax-free importation privilege of the developers could be used only by Prime Central, the owner of the SM Mall, to buy capital goods needed to build the mall.

He clarified that the proposed site was within the mixed-use development plan of Palafox and Associates, a reputable urban planner commissioned to draw up a master plan for the CSEZ and the Diosdado Macapagal International Airport.

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ROAD NETWORK: Yusi said that with or without the SM project, the government is determined to push through with building road networks around Clark as part of the plan to make DMIA the premier international airport.

Construction has started on the Subic-Clark-Tarlac expressway that will cost P21 billion, the expanded Circumferential Road-Friendship Highway, and the Mabalacat-Clark Spur Road.

He said that except for the Subic-Clark-Tarlac expressway that is projected to be completed by 2007, the other two projects would be finished next year.

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