An infrastructure-oriented thinktank said that government stands to lose at least PHP 22-Billion in taxes for the initial ten-year operation of San Miguel Aerocity, Inc. It may lose even more as no specific deadline on the airport’s tax exemptions has been included in the Senate’s approval of the franchise bill. 

“The Senate dropped the ball in ensuring government revenues for the long-term. Based on projections from MIAA’s most recent income tax payments (PHP 1.983-Billion), a ten-year income tax exemption for San Miguel Aerocity foregoes at least PHP 22.733-Billion in government revenue, assuming an annual 3% increase in income tax payments. Note should be made that the growth rate in MIAA’s income tax payments in 2017 and 2018 was 15.93%. With no hard cap or specific sunset provision on when the tax incentives end, government will certainly lose even more.”

This was the statement of Terry Ridon, Infrawatch PH convenor and former member of the House committees of legislative franchises and ways and means. 

No sunset provision

Ridon said that while the Senate defined the Bureau of Internal Revenue as the competent authority to determine whether the airport has already recovered its investment, failing to provide a specific deadline on when tax incentives end ‘hostages government revenue’ to accounting tricks. 

“Without a specific deadline on tax incentives, the airport can simply divide cost recovery within the fifty-year lifetime of the franchise, and government will have no recourse to force the recovery of income and realty taxes. Providing a hard deadline on tax incentives forces the airport to work efficiently towards cost recovery within a specific timeframe and allows government to share in the success of airport operations. This is the only fair outcome for government, nothing else.”

Ridon said without a hard deadline, government can lose as much as PHP150-Billion in income taxes for a forty-year income tax exemption.

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Legislative franchise now a requirement for all airports?

“One consequence of the franchise bill is redefining the types of businesses requiring legislative franchises. As the Bulacan airport is the first airport with a prospective legislative franchise, are we now requiring all other privately operated airports to similarly secure their own legislative franchises? Should MIAA now secure its own legislative franchise?” 

“Instead of leveling the playing field, government will be complicit in favoring certain business interests. Instead of fair play and competition, we are encouraging market dominance. Let us not mislead the public that other airport operators will benefit from this franchise bill. It is a fundamental tax principle that exemptions are specific to persons to which such exemptions were granted. The exemption will benefit Aerocity alone, no one else.”

Diminishing the President’s fight vs oligarchy

Ridon said the tax perks for Aerocity diminishes the resolve of President Rodrigo Duterte to dismantle the power of the oligarchy in the country.

“If government is truly serious in dismantling the oligarchy, there should be no sacred cows. It cannot dismantle one branch of the oligarchy while empowering other oligarchs through tax perks such as this.”

“If not, it will appear that the campaign against the oligarchy is a sham, and plainly a punitive action against powerful families critical of the current administration. Pinasara natin ang ABS-CBN dahil sabi ng Pangulo bahagi ito ng oligarkiya, pero ngayon naman pinapaboran natin ang ibang mga oligarko. Parang mali naman yata yun.”