Senator Chiz Escudero said the current administration should uphold its “no tax exemption” policy as he questioned the perks to be accorded to the proposed Maharlika Investment Corporation (MIC), which will manage the Maharlika Investment Fund (MIF).
Escudero expressed concern on the many privileges that the MIC will get supposedly to attract investors and augment government resources.
Under the proposed bills, the MIC will be exempted from national and local taxes, and from coverage of the Governance Commission for Government-owned and -controlled corporations (GCG), the Government Reform Procurement Reform Law and the Salary Standardization Law.
Zeroing in on the tax exemption privileges, the veteran lawmaker described the move as a “bad policy” if the government grants too many tax exemptions in general.
Section 31 of SB 1670 prescribes that the following transactions and assets of 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).”
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.
“The secretary of budget and management was part of the previous administration. The secretary of finance was the secretary 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,” the veteran legislator 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 seasoned lawmaker added.
The Bicolano senator said 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.
“The Land Bank and the DBP do not do not enjoy these exemptions. So, why give it to the MIC?”
He said the Land Bank of the Philippines (LBP) 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 Land Bank and the DBP do not do not enjoy these exemptions. So, why give it to the MIC?” Escudero asked.
He said he will soon recommend other sources of funds in an effort to plug the “many gaps and loopholes” in the current draft bills.
“We will be proposing a viable fund source that will live and exceed their P100 billion expectations.”
“In the next couple of days, we will be proposing where the money can come from. We’re just finishing the research on it,” Escudero disclosed.
“They (the economic managers) started with GSIS and with SSS, the pension funds. Then they now move to Land Bank 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 will 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 return of investment (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 suggest 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,” Land Bank CEO Cecilia Borromeo told the Senate committee hearing.
During the briefing, the country’s economic managers said initial capital of the Fund will be sourced from the Land Bank and DBP, and subsequent annual contributions will be from the Bangko Sentral, PAGCOR, royalties and/or special assessments on natural resources, proceeds from privatization of government assets, and borrowings.
