Push needed to pass tax reform
By Prinz Magtulis (The Philippine Star) | Updated December 19, 2016 – 12:00am
http://www.philstar.com/business/2016/12/19/1654705/push-needed-pass-tax-reform
MANILA, Philippines – President Duterte’s silence on pushing his allies in Congress to pass his tax reform agenda is taking its toll and could impact the wider economy next year when cheap credit is bound to end as his government embarks on increased welfare spending.
While bills such as the revival of the death penalty are making strides in the legislature, the first package of tax reforms remains unnumbered at the committee level, while his allies pursue another sin tax reform that quarters say will kill an early law passed four years ago.
“It depends not on him, but on his people at the House (of Representatives). He can always intervene in the later stages of the legislative process,” said Ramon Casiple, executive director of the Institute for Political and Economic Reforms.
But that has not happened yet. Duterte, who admitted early on to have little knowledge of the economy, has instead used every public engagement to insist on his much-criticized anti-drug war that has claimed thousands of lives.
Meanwhile, his economic team, led by Finance Secretary Carlos Dominguez, is having a hard time pushing for just the first of the five packages of tax reform.Congressmen also railroaded House Bill 4144 that restores a two-tier cigarette excise tax, which is seen to defeat the sin tax health law passed in 2012.
Socioeconomic Planning Secretary Ernesto Pernia said a Legislative-Executive Development Advisory Council (LEDAC) meeting will be held on Jan. 20 next year after delays.
“Schedules have been too crowded,” Pernia said in a text message. He did not reply when asked if he sees the need for Duterte to step in to push his economic agenda.
Malacañang spokespersons did not reply to request for comment.
LEDAC
There could be a lot at stake at the LEDAC. The body groups Executive and legislative representatives to discuss what bills will be prioritized based on the government’s 10-point socioeconomic agenda.
Aside from tax reform, an initial list last September showed priority measures included amendments to the Anti-Money Laundering Act to include casinos under its purview, a budget reform bill, and a measure to resize the bureaucracy.
None of those has been tackled in Congress, while the reinstatement of the death penalty, also a priority measure, was passed in the committee swiftly. Edmund Tayao, political science professor at the University of Santo Tomas, said the absence of economic policy on public pronouncements reflects Duterte’s agenda.
“Don’t expect him to be as detailed as, say, (Arroyo) when he talks about it. In the same manner, you can’t expect PNoy to speak about national security or criminality,” Tayao said in a text message.
“It doesn’t mean though that a sitting president is not handling it just because it’s not his cup of tea,” he added.
Budget Secretary Benjamin Diokno agreed, saying it takes time for economic measures like the tax reform to be passed.
“The tax reform should be done within the first 12 months of the Duterte administration. That’s the ideal timetable,” he said in a text message.
Republic Act No. 9337, which increased the value-added tax rate to 12 from 10 percent, took months of deliberation, but prodding from former president Gloria Macapagal-Arroyo allowed Congress to pass it in two succeeding days in May 2005. It was signed into law on May 24 that year and took effect July.
The same presidential support was thrown by Benigno Aquino III to RA 10351, which hurdled the Lower and Upper Houses after the bill creating it was certified as urgent. Senate deliberations took six months after Aquino mentioned the sin tax reform in his State of the Nation Address in 2012.
Casiple acknowledged there are some problems with having Duterte talk about the economy. “He is relying on his economic advisers,” he said.
But Tayao believes the President is abreast with the developments like HB 4144, which the Department of Finance opposes as it will promote lower revenues and cheaper cigarette brands in the long run.
The bill was transmitted to the Senate last week after passing the House of Representatives in just a week. In contrast, the tax reform bill remains unnumbered and not filed.
“Duterte I’m sure will act on this when asked. Perhaps he has not had the chance to look at it… Say, for example, this is passed by both houses of Congress, which I doubt, the President will surely veto it,” he said.
Looking forward
A presidential veto would be welcome, but it is hoped that it does not reach that point with the Senate being a deal breaker, according to think tank Action for Economic Reforms.
Next year will be crucial for the Duterte administration, which is poised to spend up to P3.35 trillion to boost infrastructure and social welfare. The bill, which Duterte will sign this month, contains some first-time spending on welfare like free college tuition in state universities, as well as wider universal healthcare.
This will come at a year when interest rates and oil prices are bound to go up due to external events, while revenue creations, which expanded 4.3 percent during the first four months of Duterte, are slowing down.
The Philippines imports bulk of its oil requirements, hence, higher prices with a weak peso will make them more expensive. Higher interest rates, meanwhile, could make the government shell out more for debt payments, with less revenues for public projects.
While indeed there is need for more revenues, Tayao said tax bills are “clearly political” in nature, explaining why the HB 4144 was passed and the tax reform to get stalled.
“Clearly, only a particular sector, even probably a particular company, stands to gain from this. This development should invite everyone, especially the President, to act,” he said, without elaborating.
For now, National Treasurer Roberto Tan said the Duterte administration is sticking to its budget program despite uncertainties on the revenue front.
“We remain confident that despite these external developments and market volatility, the country’s fundamentals and economic resilience will carry us forward,” Tan said.
“This administration will continue to pursue its economic agenda, including its aggressive investments in infrastructure and broad-based social services,” he said.
