Are lawmakers protecting their businesses’ tax perks?

It is already unfortunate that the current pandemic rendered millions jobless. As congress denied ABS-CBN’s application for another 25-year franchise, thousands more are added to this list. Ironically, while the government is now trying to figure out how to help derailed businesses get back on track, the same government is forcibly closing down a company that won’t need it. 

At this time though, we won’t dwell on the merits of the panel’s denial. However, we wish to raise some concerns in one of those issues they’ve put forward that may concern other companies and government agencies too, the tax perks. Seemingly, with the way it was articulated by some members of the panel, ABS-CBN’s availment of the tax perks is, in fact, illegal, a tax evading scheme. 

Now, let us put everything in proper perspective.  We must all remember that previous administrations have campaigned hardly for fresh investments and have offered incentives.  Among them, the tax holidays. Two of the most popular government agencies (among the many incentive-granting agencies) that were largely involved were the Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI). 

While with BOI, when the tax holiday ends, the registrant pays the regular rate, a PEZA registrant enjoys a special rate based on gross profit.  Such is the case of Big Dipper Digital Content and Design Inc. A subsidiary of ABS-CBN Corporation, it operates and maintains the company's media asset management system which includes converting analog video materials to digital format and video quality checking of ingested video cataloging, among others. Simply put, it processes films and TV shows for export to other countries. 

Whether this company was used by ABS-CBN for dubious transactions, we do not know.  One thing certain though is that this company’s application for registration was approved by PEZA and was under its strict regulation.  Of course, in accordance with law. PEZA, therefore, had the authority, depending on the gravity of the offenses, to penalize or even close it if malpractices had been committed.  

The same is true with the Bureau of Internal Revenue (BIR). If ABS-CBN maliciously used this subsidiary to evade taxes, the BIR will certainly find it out. As taxpayers, we must all know that the BIR is extra meticulous when it comes to related party transactions. Clearly, therefore, we don’t need congress to find it out, if evasion does exists.

Historically though, questioning tax perks enjoyed by certain companies isn’t new at all.  To recall, a company from Thailand, Charoen Pokphand (CP) Foods Corp., heeded the call of President Aquino (PNoy) during the Philippine Investment Forum 2013 to invest in agriculture, a very inefficient industry. After complying with all requirements, the BOI granted Thailand’s CP Foods a six-year tax holiday and a 30-percent tax incentive covering the importation of corn and other raw materials for its plan to develop a P2.32-billion integrated production project. 

However, it is quite revolting that, for one, while a foreign investor heeded the call, some local players, consisting of several affluent farmers associations, have asked the Supreme Court to withdraw the tax breaks given by the government through the BOI. 

Notably, agriculture is in the BOI’s Investment Priority Plans (IPPs) since 1986. It is open to both foreign (requirements are more stringent) and local investors. Thus, this vehement reaction of the local players was quite appalling. What they should have done was to ask the BOI to include agriculture in the Negative List (a list of businesses a foreigner can’t own or have limited ownership) instead, not in the IPP.

With these reactions, in both our lawmakers in the house panel and the wealthy farmers’ associations, we can only surmise that probably this attitude is embedded in the hearts of some of us, Filipinos. Remember, both ABS-CBN and CP Foods (and many others) simply availed of these tax perks in accordance with law. The same laws that congress passed.

If these lawmakers don’t like taxpayers to avail of these perks, there is a pending bill in congress that they should have given priority. Known as the Corporate Recovery and Tax Incentives for Enterprise (CREATE) bill, it rationalizes incentives. So far, however, this same congress is sitting on it just like what they did to the previous CITIRA (Corporate Income Tax and Incentives Reform Act) bill, which was aimed to remove some fiscal incentives.

If they continue to sit on it, we can only conclude that since most of them are big businessmen too, they won’t act on it as current perks benefit them. To avoid the same fate as ABS-CBN, they (and their dynasties) will just perpetuate their hold in their legislative districts to continually protect their businesses’ tax perks.