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NEWS UPDATES 29 July 2010

Philippines investment law hassle

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Companies planning to raise money through real estate investment trusts (REIT) warn that the Aquino administration’s plan to defer implementation of the new tax-eroding law, which aims to go around Philippine restrictions on foreign ownership of real estate assets, would risk turning away billions of dollars in potential investments, the Manila Times reports.

Jeffrey Lim, SM Prime Holdings Inc. chief financial office, said the combined REIT offerings of the property giants could generate $1 billion worth of new investments.

“In our road shows since last year, interest from foreign fund managers are also eagerly waiting implementation of REIT,” he said.

The executive said the company was looking at its $500-million REIT offering as a source of funding.

But if the law’s implementation were delayed, the country’s biggest retailer would have to borrow $50 million to $100 million to work on its capital requirements for the year, Lim said.

“If the REIT will not push through, we will look for an alternative, either bond or debt,” he said.

Jaime Ysmael, Ayala Land Inc. chief finance officer, said the government must look beyond the foregone taxes, and on to the revenues that REITs could generate.

“It will lead to a lot more malls offices, hotels being built, generate a lot more employment. There are multiple sources of taxes that can be generated through those activities,” the executive said in a briefing.

With the REIT law, the government would have new sources of revenues, including value-added taxes, employment taxes, income taxes, withholding tax from the increased economic activity, Ysmael said.

Department of Finance (DOF) Secretary Cesar Purisima said on Tuesday the agency would push for the deferral in the implementation of the REIT law.

He said the government would draft the implementing rules and regulations of the law in such a way that it would minimize the erosion in tax revenues.

The REIT Act, or Republic Act 9856, grants tax and other incentives to investments related to the financing and the management of big real estate projects in the country.

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