Bill seeking to correct flaws in bases conversion filed

By Tonette Orejas, PDI Central Luzon Desk
Editor's Note: Published on page A21 of the August 30, 2005 issue of the Philippine Daily Inquirer

CITY OF SAN FERNANDO: Sen. Richard Gordon has filed a bill to correct the deficiency of the Base Conversion Law (Republic Act 7227) concerning tax and duties exemptions.

Recently, the Supreme Court upheld the exemptions for investors at the Subic Bay Freeport and nullified the same for investors at the Clark Special Economic Zone, Camp John Hay in Baguio City, Poro Point in La Union and other special economic zones created under RA 7227.

Senate Bill No. 2098 seeks to amend RA 7227 by introducing a provision granting the same fiscal incentives to other ecozones, said Gordon, chair of the Senate committee on government corporations and public enterprises.

The court’s decisions disallowing the privileges in Clark and Camp John Hay raised the red flag to the world that rules in the country are changed in the middle of the game, Gordon said in a speech before some 300 Rotarians here on Saturday.

The court’s rulings in Clark and Camp John Hay were issued in July 2005 and October 2003, respectively.

Court ruling
In its recent decision, the court said that while Section 12 of RA 7227 expressly provides for the grant of incentives to the Subic zone, it fails to make any similar grant in favor of other economic zones, including Clark.

Section 15 of RA 7227 authorized the President to create economic zones in and around former bases of the United States in Pampanga and Tarlac (Clark Air Base); in San Fernando City, La Union (Wallace Air Station in Poro Point); in Baguio City (Camp John Hay); in the towns of Morong, Hermosa, Dinalupihan in Bataan; and in Castillejos and San Marcelino in Zambales.

The debate over the fiscal incentives provision of RA 7227, which Congress passed in 1992, came as the government entered the 13th year of its base conversion work.
The state-owned Clark Development Corp. has filed a motion for reconsideration before the Supreme Court in a bid to protect some 300 investors.

Threats
Some Clark investors have threatened to relocate to China, suspendexpansion plans or reduce the number of workers to cope with additional tax obligations.

Gordon said SB 2098 proposed to extend to RA 7227 the incentives guaranteed under the Special Economic Zone Act of 1995 (RA 7916).

He is proposing that the same taxation system of 5-percent final tax on gross income be applied.
Other fiscal incentives are also provided under Presidential Decree No. 66, which created the Export Processing Zone Authority, as well as those provided by the Omnibus Investments Code of 1987, and the Export Development Act of 1994.

The bill, according to Gordon, also seeks to grant free port status and the same incentives to Poro Point.