Senator Chiz Escudero said it is “bad policy” to give tax exemption to the proposed Maharlika Investment Corporation (MIC), which will manage the country’s Maharlika Investment Fund (MIF).
Under the proposed bills, Escudero said the MIC will be exempted from national and local taxes, and from coverage of the Governance Commission for Government-owned and controlled corporations (GCG).
“It is bad policy to have a lot of exemptions and very difficult to implement, if at all. So, I think they should not continue with that policy,” he said, adding that the current administration should uphold its “no tax exemption” policy.
He also questioned the perks to be granted to the MIC and expressed concern on the many privileges that the MIC will get supposedly to attract investors and augment government resources.
Escuderoe cited Section 31 of SB 1670 which provides 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).”
He said 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 MIC, he said, should be obligated to pay the taxes due as the government, and 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.
But Sen. Sonny Angara said everything is not yet final as some progress has been made in improving the bill and introducing safeguards. Angara said he believes to come up with a better MIF in the upcoming Senate hearings.
“We will scrutinize every minute details,” he added.
Escudero further 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?” he asked.
Escudero said he will soon recommend other sources of funds in an effort to plug the “many gaps and loopholes” in the current draft bills.“In the next couple of days, we will be proposing where the money can come from. We’re just finishing the research on it,” he 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 we live and exceed their P100 billion expectations,” he said.
During the first 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 said.