Local oxygen manufacturers are in the process of importing more cylinder tanks in preparation for an anticipated spike in demand amid the Covid-19 Delta variant threat.

Trade Secretary Ramon Lopez said in a virtual event on Wednesday that oxygen firms have ordered around 20,000 cylinder tanks from other countries, including China.

"Many of them started that process already in preparation of Delta so that we [could] prevent what happened in other countries. We saw shortages in oxygen," he said.

Lopez said that current industry capacity is about three times more than the demand in the country. He said that the producers have not yet increased prices amid the surplus on the production side.

The DTI chief noted that the suggested retail price for oxygen with container ranges from P2,000 to P5,000, including the deposit. Refill, meanwhile, costs P200 to P500, he added.

Still, Lopez said that DTI has been encouraging the existing manufacturers to expand capacity. He explained that it may take them one to two years to put up a new facility as they would likely need bigger infrastructure.

On Tuesday, the government said it was preparing to provide tax relief to oxygen manufacturers to encourage more production amid anticipated surge in demand.

Taxation and production

House Committee on Ways and Means Chairman and Albay Rep. Joey Salceda said on Wednesday that the Department of Finance, Department of Trade and Industry and the Philippine Economic Zone Authority could implement measures to help oxygen-makers ramp up their production amid increasing number of Covid-19 cases.

The lawmaker said these government agencies may be able to pursue other options while he is still preparing the bill on tax relief for oxygen manufacturers.

"We will abide by the President's request. I am having a bill prepared on this matter," he said.

During his public address last Monday, President Duterte said he wants to provide tax relief to manufacturers of medical oxygen, saying he will talk to Congress to push for the tax relief as a legislative priority.

The President said ample supply of medical oxygen would be crucial for government's response on the rising Covid-19 infections.

"There are immediate recourses. The DOF could also invoke Section 109 [BB] [ii] of the National Internal Revenue Code, as we enacted in CREATE [Corporate Recovery and Tax Incentives for Enterprises], which exempts from VAT the sale and importation of medical devices necessary for Covid-19. Oxygen supplies definitely fall under that category. That provision is valid until December 2023," he said.

The CREATE provides tax exemptions on the sale or importation of various Covid-19 items, such as vaccines, drugs, medical devices, and personal protective equipment (PPE). The tax-exempt status is valid and in effect for sales and imports from January 1, 2021 to December 31, 2023.

SIPP

Lopez, for his part, clarified that oxygen manufacturers may avail of the tax perks as they are part of the Strategic Investment Priorities Plan (SIPP) under CREATE law. SIPP is the list of investment sectors that may apply for fiscal incentives following the enactment of the said tax reform.

SIPP breaks down the investment plan into three industry tiers. Lopez earlier identified the following as critical industries under the new investment plan: electrical and electronics; chemical and pharmaceuticals; machinery and transport; agriculture and agribusiness; information technology-business process management; research and development; and artificial intelligence, automation, robotics, and digital technologies.

He said the oxygen manufacturers may be given income tax holidays (ITH) for a specific period and special corporate income tax after ITH period expires.

Under CREATE, the corporate income tax rate is reduced to 20 percent from 30 percent for domestic corporations with net taxable income of P5 million and below and have total assets of P100 million and below effective July 1, 2020. All other local firms and resident foreign companies are imposed a 25-percent income tax.

Salceda also said the government can implement another key intervention to exempt manufacturers of for-export oxygen supplies from their required export thresholds so that they can keep their supplies here instead of selling them abroad.

"We did this for personal protective equipment manufacturers, through the Department of Trade and Industry and the Philippine Economic Zone Authority," he said.

Lastly, Salceda said a provision on exemption from customs duties on medical oxygen supplies can also be included in the proposed Bayanihan 3, which is now pending before the Senate.

"We could extend the Bayanihan provision on exemption from customs duties on medical oxygen supplies in a Bayanihan 3 package, so that we could also include other needs such as funding for genome sequencing, additional swabbing, since no recoveries can be assumed with Delta until the subject tests negative, facilities-based quarantine, among other needs," he added.

Currently, he said, the total capacity for medical and industrial oxygen is at 603 tons per day.  With Jovee Marie N. Dela Cruz

Image courtesy of Nonoy Lacza

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