Finance Secretary Cesar Purisima remained firm on his department's stand to require property firms that will avail of tax incentives under the REIT law.
"We are all partners. There is no fight betwen us. They are all my friends. They are just trying to make more money, unfortunately, at our expense," he told reporters at the sidelines of the private-public partnership (PPP) conference that aims to attract investements on infrastructure.
He was referring to real estate firms that are eyeing to take advantage of the tax perks provided by the REIT law, which gives incentives to real estate firms that raise funds through the stock exchange.
"They (firms) are asking for tax exemptions, so as a prudent finance manager I will demand that what they are asking from us be realized," Purisima added.
Purisima had noted the possible tax-eroding effects of the REIT law, which gives incentives to real estate firms that proceed with REIT issues.
The Finance Department, which is keeping the budget deficit in check, estimates the REIT law to result in P2.7 billion in revenue losses annually.
The economic team is seeking higher tax collections amid record budget gaps that could reach up to P325 billion, or 3.9% of the entire economy, this year.
51% vs 33%
The issue on the REIT was triggered when the Department of Finance and the Bureau of Internal Revenue (BIR) pushed for the increase in the required public float of the REIT firms to 51%.
This suggested portion of the firm's stocks that public investors can own is higher than the 33% the Securities and Exchange Commission has specified in the proposed REIT listing rules.
However, in order to enjoy these incentives, the REIT must be listed with a stock exchange and maintain its status as a listed company and comply with all the requirements of the REIT Act, including annually giving out at least 90% of its distributable income to shareholders.
Since investors in REIT firms can also avail of tax incentives out of the portion of their share in almost 75% required distributable income of the firm, market players have been banking on the REIT to attract more investors.
REIT firms pool income-generating property assets and raise money by listing on the stock exchange. It is considered as an alternative investment to buying the physical property.
"We are optimistic that we can come up with a win-win solution in that issue. We are working on the groups concerned," Francis Lim, former Philippine Stock Exchange president, told abs-cbnnews.com on Friday.
Lim shepherded the passing of the REIT law in 2009 before he resigned in January 2010. It has yet to be implemented as the BIR, which is under the Finance Department, has yet to clear the REIT tax rules.
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