Rough sailing for tax reform
The revenue measures the Duterte administration wants to implement to meet the funding requirements of its “Build, Build, Build” program are going through some rough sailing in the Senate.
Earlier, the House of Representatives approved on final reading a bill that would, among others, increase excise taxes on oil-based products and remove the exemption from the value-added tax (VAT) of some goods and services, and, in the process, raise P1.163 trillion in revenues from 2018 to 2022.
Although this bill fell short of the Department of Finance’s wish list of P1.266 trillion, Finance Secretary Carlos Dominguez III had no choice but accept the reduced revenue intake.
But with the way things are moving in the Senate, Dominguez may be in for more frustration. Some lobby groups are working hard to reduce, if not eliminate, the proposed taxes on their principals’ products, or maintain the VAT-free status of their services.
Word on the street is these lobbying efforts have received favorable response from many senators and there is a strong possibility that the House-approved revenue measures would be further eroded.
If this happens, the administration would be forced to rethink its ambitious infrastructure program and make substantial adjustments in its pro-poor budgetary appropriations.
In the face of this looming setback, Dominguez said he might ask President Duterte to veto the watered down version of the administration’s comprehensive tax reform program.
Dominguez believes that a further reduction of the House-approved measure would imperil the administration’s plan to improve the country’s infrastructure and give meaning to the recently signed law giving free tuition to students of state colleges and universities.
Depending on your political persuasion, his statement may be viewed as a veiled threat to embarrass the senators into toeing the administration line, or a cry of desperation about his inability to convince them about the urgency of the proposed revenue measures.
A presidential veto would translate to the continued operation of a tax system that is beset with leakages and loopholes that prevent the country’s economy from achieving its full potential—a situation that Dominguez and his fellow economic managers want to get rid of with the tax reform program.
Careful, subliminal wishes sometimes have uncanny ways of turning to reality.
Lately, President Duterte has not been heard from on this issue. It will be recalled that when the tax reform bill got stalled in the House, he certified it, upon the recommendation of his economic managers, as urgent and—pronto!—the measure was immediately and overwhelmingly approved with minor revisions.
If Dominguez is serious about getting the bill off and running in the Senate, he has to enlist (once more) the active support of the President. Neither a veto threat nor appeal to the good sense of the senators nor enlisting the assistance of Senate President Aquilino “Koko” Pimentel III will do.
Although the administration party controls the Senate and, in theory, may be relied upon to support Dominguez’s moves in his capacity as the President’s alter ego, it is essential that Mr. Duterte step into the picture and wield his “extra legal” influence over the senators to assure the passage of the tax measures.
Time is running short in raising the funds needed for the administration’s “Build, Build, Build” program. It’s less than four months away from the end of the year. By mid-December, the government structure, Congress included, will practically be on a standstill.
The revenue bill has to get past the Senate and bicameral conference committee and signed into law by the President by the end of November so it can be implemented at the earliest at the start of 2018.
Another month of delay and the bill could get stuck in Congress up to God knows when. In that unfortunate event, the administration’s flagship project may have to be renamed “fantasy, fantasy, fantasy.”
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