Elijah Felice Rosales – The Philippine Star
June 10, 2022 | 12:00am
About P6 billion in revenues were lost by the government to Hanjin Heavy Industries Inc. after the shipbuilder failed to deliver on its investment commitments to the Philippines.
The Cabinet-level Fiscal Incentives Review Board (FIRB) said the government lost at least P370 million in forgone revenues due to the tax perks given to Hanjin in 2015.
Hanjin, in its financial statement for that year, reported a taxable income of P1.23 billion after the shipbuilder deducted its income tax holiday (ITH) worth P370 million.
Further, Hanjin received power subsidies amounting to P5.17 billion for its operations from 2009 to 2018 at the Subic Bay Freeport Zone.
The FIRB said Hanjin failed to maintain a labor force of at least 20,000 workers. Likewise, the shipbuilder backed down from its pledge to invest $2 billion in a Mindanao shipyard that was supposed to create up to 30,000 jobs.
Finance Assistant Secretary and FIRB secretariat head Juvy Danofrata said the Hanjin disaster should be reason enough for investment promotion agencies (IPAs) to improve their evaluation and impact analysis prior to the grant of tax perks.
“Given the failure of this shipyard in Subic, jobs were lost and productivity in the area declined,” Danofrata said.
“The project cost the government so much money in forgone revenues, which could have been granted to performing and more deserving business enterprises,” she said.
The Corporate Recovery and Tax Incentives for Enteprises (CREATE) Act, signed last year, set up the FIRB as an oversight board for the issuance of tax privileges to investors. IPAs approve projects below P1 billion while the FIRB assesses investments of P1 billion and above.
When Hanjin filed for bankruptcy in 2019, it left $412 million in outstanding loans to five banks in the Philippines and another $900 million to financial institutions in South Korea. The shipbuilder enjoyed seven years of ITH and, upon expiry, a preferential tax of five percent on gross income during its existence from 2006 to 2019.
On the other hand, the Subic shipyard used to be owned by Hanjin welcomed a new locator in April when New York-based Cerberus Frontier concluded a buyout of the facility.
The FIRB authorized Project Agila, the P17 billion redevelopment of the former Hanjin shipyard in Subic, to pay a special tax of five percent for up to 10 years.