MANILA - Tax perks granted to firms should be reviewed after the "billions of pesos" were lost in tax breaks for the defunct Hanjin shipyard in Subic, the Department of Finance said Tuesday.
Hanjin Heavy Industries and Construction Philippines, a subsidiary of the South Korean shipbuilding giant Hanjin Heavy Industries & Construction Co., Ltd, received tax incentives amounting to P370 million in 2015 alone, the Fiscal Review and Incentives Board told the DOF in a report.
It was previously registered under the Subic Bay Metropolitan Authority (SBMA) and the Board of Investments (BOI) for tax perks in 2006 and 2009, respectively., the DOF said.
During its operations, it was granted 7 years of income tax holiday and special corporate income tax rate of 5 percent on gross income earned as well as duty-free importation on raw materials and equipment, the agency said.
On top of that, it also received power subsidies reaching P5.17 billion from 2009 to 2018 even though it failed to maintain employment of 20,000 workers and invest in another $2 billion planned Mindanao shipyard which was supposed to generate 30,000 jobs, the DOF said.
“This is the reason why we must impose stringent evaluation and impact analysis before the grant of tax incentives,” said Finance Assistant Secretary and FIRB Secretariat head Juvy Danofarata.
“Given the failure of this shipyard in Subic, jobs were lost and productivity in the area declined. The project cost the government so much money in foregone revenues that could have been granted to performing and more deserving business enterprises,” Danofrata added.
Incentivized enterprises are given tax perks if they are expected to generate jobs and contribute to the economy, among others.
In 2019, Hanjin filed for court rehabilitation proceedings as it was unable to pay around $1.3 billion in debt due to the global slowdown in shipping that affected its operations.
US-based private equity firm Cerberus Capital Management is funding the proposed Hanjin rehabilitation project with a total cost of P17 billion.