Under the Enhanced Defense Cooperation Agreement (EDCA), the US military will not pay the Philippine government any tax since it is a government-to-government agreement and not a contract for commercial purposes, a defense official noted on Thursday.
“This is a defense cooperation agreement,” Defense Undersecretary Pio Lorenzo Batino said in a press briefing in Malacañang.
“This is not a transaction that would generate income. That was not the purpose of the EDCA. We think that through the defense cooperation that will be implemented here, the benefits that will be enjoyed by both the AFP and the US military would be mutual,” he said.
Tax issues are also consistent with the provisions of the Visiting Forces Agreement (VFA) between the Philippines and the US, said Batino, who chaired the Philippine panel in the EDCA negotiation.
The VFA provision states that the US military will be exempted from paying landing charges or port charges.
It is in recognition of the rule that a sovereign power does not have jurisdiction over another sovereign, he explained.
Philippine Ambassador to Malaysia Eduardo Malaya, member of the Philippine panel representing the Department of Foreign Affairs, said the reason why there is no provision on compensation in the EDCA is that it was envisioned to be a mutually beneficial agreement.
Malaya said there is a distinction between a defense agreement, which by nature is a government-to-government agreement, and a contract of lease.
This is not a contract of lease where rent is required, he said, noting that in fact, Japan and South Korea, which host large US military bases in their respective territories, provide subsidies for the maintenance and operation of the US bases.
He cited that in 2011, Japan provided US$ 3.7 billion in subsidy to the US military for the maintenance and operation of US forces there.
South Korea this year allotted US$ 749.6 million for the maintenance of the US bases in its territory, the ambassador said, adding that it is the same with Germany and other places where there are US facilities.
On the issue of taxes on utilities, Malaya said these are counterpart funds on the part of the Philippines, and this is an accepted practice in the country, particularly with respect to the receipt of foreign donations and foreign assistance.
“This is what you call as a matter of assumption of the taxes that are supposed to be collected from a foreign government entity,” he added. PNA