Airing concerns over government’s grant of tax perk, Senator Francis Escudero zeroed in on the privileges accorded to the proposed Maharlika Investment Corporation (MIC), which will manage the recently created Maharlika Investment Fund (MIF).
Escudero also questioned the basis of requiring two banks to provide capitalization of P50 billion and P25 billion each for the MIF “without guaranteeing” a return of investment (ROI).
In a statement, the senator stressed Thursday the Marcos administration should uphold its “no tax exemption” policy as he questioned the perk proposed to be accorded MIC.
Escudero expressed concern over the “many privileges” the MIC may avail of supposedly to attract investors and augment government resources.
As provided in the proposed enabling law, he noted “the MIC will be exempted from national and local taxes, and from coverage of the Governance Commission for Government owned and Controlled Corporations, the Government Reform Procurement Reform law and the Salary Standardization law.”
Zeroing in on the tax exempt privileges, the veteran senator conveyed apprehension, viewing the proposal as a “bad policy if the government grants too many tax exemptions in general.”
Escudero cited Section 31 of Senate Bill (SB) 1670 that prescribes the MIC and MIF shall “be exempt from local and national taxes, direct and indirect, that may be imposed under the Local Government Code of 1991, and the National Internal Revenue Code of 1997, as amended, pursuant to the regulations to be issued by the Department of Finance [DOF], upon the recommendation of the Bureau of Internal Revenue [BIR].”
Moreover, the senator added that importation of supplies and equipment by the MIC and MIF “shall also be exempt from customs duties, in accordance with the provisions of Republic Act No. 10863 or the Customs Modernization and Tariff Act.”
At the same time, he also reminded “the Secretary of the DOF was the Secretary of the Department of Budget and Management in the previous administration, and the policy of the previous administration was not to provide tax exemption, or at the very least minimize it.”
Escudero pointed out “it is bad policy to have a lot of exemptions and very difficult to implement, if at all. So, I think they should continue with that policy.”
The senator suggested “the MIC should be obligated to pay the taxes due, as the government, if it wants to, can always funnel the money back to the Maharlika Fund by way of the Tax Expenditure Fund as provided for in the annual General Appropriations Act.”
This as he also noted the Land Bank of the Philippines (LandBank) and the Development Bank of the Philippines (DBP), the financial institutions eyed to be the major contributors to the MIF, have been paying taxes as the rest of the other corporations. “The LandBank and the DBP do not enjoy these exemptions. So, why give it to the MIC?” he asked.
The senator signaled he will soon recommend other sources of funds in an effort to plug the many gaps and loopholes in the current draft bills, indicating that “in the next couple of days, we will be proposing where the money can come from. We’re just finishing the research on it.”
The lawmaker likewise recalled, “The economic managers started with the Government Service Insurance System and with Social Security System pension funds. Then they now move to LandBank and DBP and even included the BSP. I don’t know where else they will go after this, but we’re finishing up the research and we will be proposing a viable fund source that we live and exceed their P100 billion expectations,” he said.
At the hearing on the proposed establishment of the MIF conducted by the Committee on Banks, Financial Institutions and Currencies, Escudero questioned the basis of requiring the two banks to provide capitalization of P50 billion and P25 billion each in the fund without guaranteeing a ROI.
In the position papers submitted by these government financial institutions to the Senate panel, they expressed concern on the bill’s silence on their supposed ROI and asked that it be specifically stated in the proposed law.
“We actually suggested that the draft bill to indicate our ROI in the MIC or MIF as being contemplated. If it is not in absolute percent, maybe it should be like a formula or something that can be referenced to the current averaged ROI being already enjoyed by the bank from their regular investments,” LandBank CEO Cecilia Borromeo told the Senate panel hearing on Wednesday.
During the briefing, the country’s economic managers said initial capital of the Fund will be sourced from the LandBank and DBP, and subsequent annual contributions will be from the BSP and BSP royalties and/or special assessments on natural resources, proceeds from privatization of government assets and borrowings.