Some mayors are wary about the business sector’s proposal to declare the entire island of Cebu a special economic zone because of the possible loss of tax revenues in their cities.“We can’t just say yes. Let’s be intelligent about it. Tell us exactly what is its overall impact,” said Cebu City Mayor Tomas Osmeña.He and Mandaue City Mayor Thaddeo Ouano were lukewarm to the idea of a total Cebu ecozone which the Cebu Chamber of Commerce and Industry (CCCI) wanted to explore in a more thorough study. They both asked for a careful study of the pros and cons.
In her visit to Cebu on Wednesday, President Gloria Macapagal-Arroyo encouraged the chamber to pursue the study after she was briefed by CCCI president Francis Monera.Monera said the President expressed her support for a Cebu province ecozone because of its ability to attract more foreign and local investors.“She believed that whatever loss the country would have in terms of taxation could be offset by more vigorous development and economic activities in Cebu,” he told Cebu Daily News earlier.Gov. Gwendolyn Garcia was also supportive but said she first wanted to consult the mayors of the 47 municipalities and five component cities as well as Capitol lawyers.“I told the President: I believe, Madame President, that eventually the long-term gains would far outweigh whatever, if any short-term disadvantages this may have to LGUs.” But the governor said “extensive discussion” is needed in a dialog with business leaders and mayors of the different towns and cities.
Losses
Mayor Osmeña was worried that the grant of tax holidays and incentives in the ecozone would deprive local governments of revenue and make LGUS dependent on the national government for their share of the Internal Revenue Allotment (IRA) .“With exemptions on the payment of real property and business taxes, what will we do? How will we make up for lost taxes? That’s a very big share of our income,” the mayor said.But Joel Mari Yu, investment adviser of City Hall, clarified that the incentives for locators in an ecozone refer to tax breaks given by the national government, not local taxes such as business permit fees (or business tax) and real property taxes which are main sources of revenue for municipalities and cities.“Locators are more concerned with the huge duties on imports and income taxes. Local government taxes such as business permits and real property taxes are just a small amount for them,” said Yu. Yu favored the special ecozone status for Cebu province as a means of attracting more foreign direct investments. "It is desirable and preferable for Cebu because we can then accommodate foreign investors anywhere in the island,” said Yu.
Mandaue
Mayor Ouano said Mandaue City already has its own incentives to draw investors under a 2004 ordinance.Under the Mandaue City Investment Incentive Code, the city offers discounts in business permit fees and real estate taxes.He said Mandaue already has the lowest tax rates among LGUs and that the city is not collecting sales tax from new investors.For example, a local investor who puts in P4 million to P25 million, can enjoy a 25-percent discount in both business permit fees and real estate taxes for three years.A foreign investor with capital of $200,000 can enjoy the same discount.Mayor Osmeña said his impression of an ecozone was that of a “confined space” like the South Reclamation Project (SRP) and the Mactan Export Zone (MEZ).Osmeña said he wanted to sit down with the proponents to clarify its effect on local taxes.The mayor said he preferred having ecozones put up in provinces that had no zones at all like Bohol and Negros so that residents in these provinces don’t have to come to Cebu for jobs.Instead of granting tax holidays, Osmeña said, he would rather offer investors an exemption from the minimum wage law for the first 10 years of operation. He noted that the cost of living here is lower than Metro Manila.Osmeña cautioned that ecozones do not necessarily create more jobs.He cited as an example the ecozone in Naga town that had remained unused. The ecozones in Zamboanga and Cagayan Province also failed to serve its purpose despite being a free port.“We have to be very careful to realize that you can’t legislate supply and demand. It should be decided based on market conditions,” he said.
Legislation alone will not create jobs, said the mayor.
“Let us be careful with what we are asking for. Let’s put our feet on the ground. I’m not even sure of what they are asking for.”
source
http://globalnation.inq7.net/cebudai...rticle_id=2732
Cebu Province as Special Ecozone
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