THE Philippine government let go of an estimated P6 million in taxes when it agreed to low tax rates on public utilities for American soldiers who will be in the country under the Enhanced Defense Cooperation Agreement (EDCA) between Manila and Washington.
A source, who is familiar with EDCA’s drafting until the pact’s signing but is not authorized to speak on the matter, made the disclosure on the day that the Department of Foreign Affairs (DFA) presented its P12-billion proposed budget for 2015 before the House appropriations panel.
EDCA allows increased presence of American troops in the country, as well as American troops and their artillery’s unimpeded access to Philippine military bases.
“We estimated that the taxes [which will be waived under EDCA]would amount to P6 million, covering mostly water and electricity [dues]. We deemed that the figure wasn’t significant enough because the Americans, under EDCA, will have to build their own infrastructure facilities [wherein they will also have to pay taxes when buying construction materials],” the source said in a chance interview with The Manila Times.
“We figured it wasn’t that much, considering that the agreement is mutually beneficial. Their presence is like our insurance [in case of threats or attacks]. We had to give something so we’ll also have leverage. Besides, an exercise of sovereignty, which includes military activity such as EDCA between the two countries, is really exempt from such taxes,” the source added.
The EDCA was signed between Manila and Washington amid China resorting to at least eight incidents where it showed intimidation and aggression against Filipino authorities and fishermen who sail to the Spratly Islands and the Scarborough Shoal in the West Philippine Sea (South China Sea). Before the anonymous source disclosed the amount of tax waived, House Deputy Minority Leader Neri Colmenares of Bayan Muna party-list lashed at DFA Secretary Albert del Rosario for the supposedly onerous tax provision.
Colmenares also questioned an EDCA provision that would allow the American troops to operate their own telecommunications system without having to secure a franchise from Congress.
Del Rosario responded that such provisions are common in mutually beneficial agreements between countries, and that the country also has a pact of the same nature with Japan, under which Tokyo provided the Philippines an ODA (Official Development Assistance) for upgrading health facilities.
“Since the agreement is mutually beneficial, there is assumption of [certain]taxes [by]the host country. It is a common practice,” he said.
“As for the frequencies [of the telecommunications system], what would EDCA require is registration, not franchise, because these frequencies are not for commercial use,” del Rosario added.