Advocacy group Action for Economic Reforms (AER) has urged the Senate to strike down the tax exemption provision on the proposed airport franchise of the San Miguel Aerocity Inc. saying this runs contrary to the core objectives of the Corporate Recovery and Tax Incentives for Enterprises bill (CREATE) which seeks to rationalize the system of providing fiscal incentives.
Under Section 16 of Senate Bill (SB) 1823, which seeks to grant a franchise to the San Miguel Aerocity to construct a domestic and international airport in the Municipality of Bulakan, the government is mandated to provide exemptions from all national and local taxes for a period of up to 50 years.
“Legislating another tax incentive such as the provision in SB 1823 undermines the goal of CREATE. It sets a dangerous precedent where individual corporations will just approach congress for tax perks, instead of going through the systematic fiscal incentives criteria that CREATE offers,” the AER said.
“It opens the floodgates for more corporate lobbying for fiscal incentives. We thus propose that the San Miguel airport project, if it wants to pursue tax incentives despite our objection, be subject to the process and standards of CREATE, which will soon be passed,” it added.
The organization also said the fiscal incentives can be justified, whenever a failure in the market exists.
“In this issue, market failure is absent because current and future demand for air travel can be addressed by enhancing and expanding existing airports,” the AER said.
The organization cited a study released by the Japan International Cooperation Agency (JICA) in 2016, which said airport demand forecast shows that enhancements in the services provided for by the Ninoy Aquino International Airport (NAIA) and the Clark International Airport (CRK) will address current and future demand for air travel in the Greater Capital Region.
“Also, the planned airport in Bulacan is in close proximity to the CRK. Hence, it will merely be competing with an enhanced and expanded CRK for the same passengers, instead of serving a market that cannot access CRK,” the AER said.
“This ironically creates the condition for market failure since two airports close to each other lead to sub-optimal outcomes,” it added.
The AER said if the private sector decides to build a new airport, they must shoulder the entire cost, and taxpayers must be spared from the burden.
“San Miguel has the freedom to construct its airport if it wants to compete with NAIA and Clark, but like any business or entrepreneurial activity, it must fully bear the risk,” the organization said.
“Secondly, the construction of the San Miguel airport is a private good, given that there is no market failure. Yet it seeks government subsidy,” the AER also said.
The organization said since congestion will be prevented by the supply of air travel services that NAIA and CRK will provide, with the latter having room for expansion, the government has no compelling reason to subsidize another airport.
“In the same vein, a new airport that is in close proximity to CRK does not substantially provide additional public benefits. The service it provides, from a public good perspective, is redundant. Hence, government and the taxpayer should not shoulder the costs of this airport’s construction,” the group said.
Environment advocates, meanwhile, have opposed the project due to the possible geological hazards of the reclamation component of the project.
In a virtual briefing yesterday, Narod Eco, a researcher from the University of the Philippines-Diliman, cited a study released in 2014 which said serious problems will be created by the reclamation. These include liquefaction and accelerated land subsidence or sinking of the ground.
“Imagine if you put an airport in Bulacan, after a few years it would have sunk already.
Kansai Airport in Japan should be an example. They thought they calculated the natural subsidence rate but they were not able to foresee that it will sink very fast. Japan is a nation with very advanced technology and science, maybe we should be skeptical on such projects and ask for more details,” Eco stated.
In the same briefing, Gloria Estenzo Ramos, vice president of Oceana, said proposed urban projects in the future should be considered to be located far from coastal areas.
Ramos said the Philippines is vulnerable with the different effects of climate change.