A lawmaker wants to extend the period of income tax exemption granted to Philippine shipping ventures by another 10 years to sustain the development and competitiveness of the local shipping industry as well as ensure the stable employment of Filipino seafarers.
Rep. Jesulito Manalo (ANGKLA partylist) said he has filed House Bill 4550 spelling out the grant of this 10-year extension period up to the year 2024 for local shipping enterprises to entice more investors to pour money into the country’s overseas shipping business and modernize our merchant fleet.
These, in turn, will stimulate the economy and guarantee a stable source of employment for Filipino seafarers, who bring in millions of dollars in foreign exchange remittances to the country yearly, said Manalo.
ANGKLA, the partylist representative of the maritime sector in the Congress, is an ally of the National Unity Party (NUP) under the Coalition of Peace and Development.
Manalo said the extension of the tax incentive will help the local shipping sector compete with foreign ship registries and adjust their business expansion plans.
"For instance, ship mortgage loans taken by ship owners usually have a 25-year payment scheme. Hence, it is necessary that assistance extended to these ship owners through incentives, perks and privileges be granted for a longer and more liberal period of time. This way, the present ship owners can enjoy the benefits of the law, recoup their investments and be enticed to further expand their shipping business and operations,” he explained.
An existing law, Republic Act 9301, which amended RA 7474, otherwise known as the "Philippine Overseas Shipping Development Act," granted a 10-year income tax exemption to local shipping enterprises in 2004. The law is set to expire this year.
"RA 7471, as amended by RA 9301, undoubtedly supports the government's national policy of promoting the development of Philippine overseas shipping. The government must not lose sight of this policy now, more than ever. Indeed, the country being an archipelagic state, stands to benefit more if the overseas shipping industry is further improved and expanded,” Manalo said.
Manalo’s HB 4550 seeks the amendment of Section 7 of RA 7471, as amended by RA 9301, so that "a Philippine shipping enterprise shall be exempt from payment of income tax on income derived from Philippine overseas shipping from the date of approval of the Act.
“The entire net income, after deducting not more 15 percent thereof for distribution of profits or declaration of dividends, which would otherwise be taxable under the provisions of Title II of the National Internal Revenue Code (NIRC) is reinvested for the construction, purchase or acquisition of vessels and related equipment and/or in the improvement or modernization of its vessels and related equipment in accordance with the regulations," HB 4550 states.
With only 129 registered overseas vessels flying the Philippine flag at present, Manalo said the continued grant of tax incentives will greatly help in expanding this small fleet.
He noted that in other ship registries like Panama and Liberia, “ship owners do not pay income tax but instead pay tonnage tax.”
Manalo noted that even with the tax exemption, the government will still generate a substantial amount of income from the shipping sector by collecting common carrier's taxes and bareboat charter taxes, not to mention the steady flow of dollar remittances from Filipino seafarers.