The government lost billions of pesos in the form of tax breaks and subsidies for the now-defunct Hanjin Heavy Industries and Construction Philippines Inc. (HHIC-Phil), the Department of Finance (DOF) said in a statement yesterday.
The DOF said the
Fiscal Incentives Review Board (FIRB) secretariat has reported the defunct Hanjin shipyard at the Subic freeport received tax incentives amounting to P370 million in 2015 alone based on its audited financial statements on its operations for that year when it earned a net taxable income of P1.234 billion.
After deducting its income tax holiday (ITH), P370 million revenues were waived.
On top of the tax incentives, the DOF said HHIC-Phil also received power subsidies for its operations at the Subic Bay Freeport Zone amounting to P5.17 billion from 2009 to 2018, even though it failed to maintain an estimated employment of 20,000 workers and invest another $2 billion in the planned Mindanao shipyard that was supposed to create 30,000 jobs. The Mindanao shipyard did not push through.
“This is the reason why we must impose stringent evaluation and impact analysis before the grant of tax incentives,” said Juvy Danofrata, DOF assistant secretary and FIRB secretariat head.
Danofrata underscored the FIRB’s mandate to ensure companies receiving tax privileges are able to deliver on their performance commitments such as job creation and economic contribution of their incentivized enterprises.
“Given the failure of this shipyard in Subic, jobs were lost and productivity in the area declined. The project cost the government so much money in foregone revenues that could have been granted to performing and more deserving business enterprises,” she added.
HHIC-Phil, a subsidiary of the South Korean shipbuilding giant Hanjin Heavy Industries & Construction Co. Ltd., was previously registered under the Subic Bay Metropolitan Authority and the Board of Investments for tax perks in 2006 and 2009, respectively.
During the company’s existence, it was granted seven years of ITH and a special corporate income tax rate of 5 percent on gross income earned upon the expiration of its ITH.
Apart from these perks, the company was granted tax and duty-free importation on raw materials and capital equipment.
In a statement last month, the DOF said the FIRB approved the grant of tax incentives to Project AGILA for the P17-billion redevelopment and operations of the Hanjin shipyard in Subic Bay Freeport Zone.
The project, funded by United States-based private equity firm Cerberus Capital Management, was granted special corporate income tax, value-added tax (VAT) exemption from importation, VAT zero-rating on local purchases and duty exemption on importation. – Angela Celis
