A not so amusing tax relief

A Philippine movie entered in this year’s Cannes Film Festival in France is among the foreign and Hollywood movies that qualified to vie for the coveted Palme d’ Or award. The Philippine entry, Kinatay, is a movie about corrupt cops who butchered — as the title literally meant — to pieces a prostitute and witnessed by a trainee-policeman.

We’re hopeful for our Philippine entry to make good, if not win, in this prestigious film competition. Qualifying for it was enough inspiration for other Filipino movie producers to follow suit. I’m no local film buff but our very own entertainment editor Ricky Lo believes there are quite a number of low budgeted but well-made Filipino movies. These are the “indie” films or those made by independent producers.   

Like any other businesses, the Philippine film industry has seen movie production outfits, even the big ones, closing shop due to heavy losses. Many of them lost so much money in their movies that flopped at the box office. Industry estimates place around P10 to P20 million of capital or investment is poured to make one big budgeted movie. This is why the local movie industry has been working hard to get some form of relief from the government like tax breaks and other non-tax incentives. 

What could have been the most awaited good news for Philippine movies  may yet become a nightmare. Instead of rejoicing, our country’s moribund movie industry is generally dreading the day when a Congress-approved bill lapses into law tomorrow. Once it takes effect, the new law reduces the 30 percent amusement tax imposed on movies shown at theaters to just 10 percent.

This is under a still un-numbered Republic Act that will amend Section 140 (A) of RA 7160, or the Local Government Code of 1991. This provision states: “The province may levy an amusement tax to be collected from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than 10 percent of the gross receipts from admission fees.”  

With such huge reduction in tax burden, why would the Filipino film producers still not be happy? Simply because the all-encompassing tax relief will apply to all and not just to local Filipino movies but also to importers and distributors of Hollywood films and other foreign-produced movies.

The beef of our local movie industry stems from the fact that it’s only the local distributors and importers of Hollywood movies and canned TV shows and other foreign-made films who will benefit a lot from this tax reduction. Film importers would be getting the same tax relief for much lower amount of capital investment while the local movie industry invested so much to produce just one film but get the same reduced amusement tax.

This situation is best captured by the symbols of two facemasks used by the Philippine entertainment industry: one face is laughing while the other is crying. 

Worse, the implication of this soon-to-become law will benefit also all other kinds of amusement and entertainment activities that include boxing to cockfighting that are all under the jurisdiction of local government units. And since this is a local tax application, a number of LGUs are similarly apprehensive over the implications of this Congress-approved legislation.

For obvious reasons, President Arroyo has opted to just let it lapse into law after this was submitted to her for signing into law. While this maybe a local tax matter, any diminution of the financial capability of LGUs, however, is also a cause of concern for the Department of Finance.

The entitlement of internal revenue allotment (IRA) of LGUs depends on their local tax collections. If LGUs have lower tax takes, they get lower IRAs. And if they have lower IRA share, the LGUs then asks financial dole out from the national government. So the circle goes around. Unfortunately, it hits back the taxpayers in terms of lesser or poorer public service. 

Any reduction in the revenue collection of the Finance Department is certainly non-negotiable, especially to forego amounts from veritable sources of tax revenues. If the Finance Department frowns upon the proposed scrapping of the five percent tax on imported books, what more for a reduction in the amusement tax from 30 percent to 10 percent?

Ironically, this soon-to-become law is the bill crafted and filed by one of their colleagues in the Philippine filmdom, Sen. Ramon “Bong” Revilla Jr. who himself is a movie producer and action star, and whose family, I heard, owns a number of cockfighting arenas in their home province in Cavite.

With so many fellow actors in the Upper Chamber that include Senate president pro tempore Jinggoy Estrada and Lito Lapid, the proposed law naturally got its much needed support to ensure its passage through the legislative mills. The problem is they were too eager to please their comrades in the movie industry, but failed to fully comprehend the implications of this legislation.

The counterpart bill at the House of Representatives was authored by Buhay party list representative Irwin Tieng. Tieng is the son of William Tieng who owns Solar Entertainment Corp., a company that, among other things, engages in airing boxing matches in local cable TV, importer and distributor of Hollywood and other foreign-produced TV shows and movies for exhibition in the Philippines. 

By the way, the Solar owner sits as board member of the sequestered TV station RPN-Channel 9. But I learned he resigned already from the board after he was elected by President Arroyo to become its chairman of the board. He cited “conflict of interest” for his resignation because his Solar company has a long-term block-time agreement with RPN-9. After a sort of epiphany, the elder Tieng realized this, a year after he joined the RPN-9 board when his Solar company’s contract was extended until the year 2012.

Yes, he is the same Tieng who owns the Solar Sports that is the TV partner of our “Pambansang Kamao” Manny Pacquiao in the HBO Pay-for-View and the local airing of the latter’s recent knockout bout with Ricky Hatton. No wonder Sen. Bong Revilla along with other congressmen were only too happy to watch the Pacquiao-Hatton match in Las Vegas, Nevada!