Gov’t subsidy allows AFP to expand commissary

MANILA, Philippines - State subsidy has maintained the viability of a three-decade-old chain of military convenience stores, which is expanding with eight new outlets within various military camps this year. The Armed Forces of the Philippines Commissary and Exchange Service (AFP CES) will put up two drugstores in Camp Navarro in Zamboanga City and in Mactan Air Base in Cebu City. New convenience stores will be constructed in Camp Gen. Ciongco in Awang, Maguindanao; the 9th Infantry Division headquarters in Pili, Camarines Sur; Camp Hernandez in Iloilo; Poro Point Naval Station in La Union; Camp Murcia in Negros Occidental; and Camp Bautista in Jolo, Sulu. Major Annie A. Abella, AFPCES chief-of-staff and chief of corporate plan, told BusinessWorld the commissary receives an annual subsidy from the government, allowing the commissary to sell at a lower price. "Last year, we were given P340 million worth of tax credit certificate. We were able to post an P80-million profit, a 13% increase from 2006’s profit of P69 million, when we were given a P214-million tax subsidy," she said. The Department of Finance Web site defines a tax credit certificate as a document that shows the amount of tax credit for which the taxpayer is allowed or entitled to that can be used to settle the holder’s obligations due the government. The credit could be considered a refund of overpaid taxes to offset tax liabilities; credits against taxes and/or duties equal to those paid on raw materials used in manufacturing export products; and a reward or incentive granted to taxpayers for satisfying certain requirements of an incentives law. Ms. Abella said AFPCES submits an inventory of purchases to the Fiscal Incentives Review Board of the Department of Finance to avail of the tax subsidy. "We do not get the whole tax subsidy in one sitting. It is given per transaction." Cannot stand alone She admitted the commissary cannot stand on its own without state support. "The purpose of selling goods at an economical price will be defeated. If we will receive no subsidy we could not afford to pay our suppliers, so we would have to raise our prices," she added. Ms. Abella said that the commissary offers three major products: petroleum, medicine and general merchandise; all products are exempt from the 12% expanded value-added tax. The commissary’s "authorized customers" are active military personnel, veterans, retired soldiers and their dependents. They are given identification cards for access to the goods. "The commissary is not open to everybody," Ms. Abella said, adding each customer is limited to a maximum of P5,000 worth of purchases in one transaction. But there was a time when the store chain was on the red. Shortly before his term ended in 1997, President Fidel V. Ramos cut total expenditures by 25% of authorized regular appropriations for non-personnel services due to economic difficulties brought about by the peso’s depreciation. This effectively suspended all tax subsidies. Without the tax subsidy, the commissary’s debts to suppliers piled up. Sales dwindled without state support, until June 2002 when the Arroyo administration, which took over the ousted Estrada government in 2001, granted a P21-million tax subsidy to AFPCES, most of which was used to pay debts to their suppliers. To augment its income, the commissary in Camp Aguinaldo, the military’s general headquarters in Quezon City, allowed traders to rent a portion of its store for P500 per square meter. The AFPCES was also forced to close some outlets and reduce personnel. "We started to recover in 2004. The government was able to award us a P156-million tax subsidy, but only P63 million was used to buy new products. The rest was used to pay off our debts," Ms. Abella said. AFPCES was created through a Letter of Instruction issued by President Ferdinand E. Marcos on Oct. 19, 1972. It had an initial capital of P5 million through a loan from the Philippine Veterans Bank. It presently has 33 outlets nationwide, with three gasoline stations and five drugstores. - Jhoanna Frances S. Valdez, BusinessWorld