Sectoral objections to tax reform

The lobbyists for the business sectors that may be adversely affected by the administration’s proposed comprehensive tax reform program have their work cut out for them when Congress resumes its session on July 24.

After President Duterte certified its urgency, the House of Representatives quickly approved on third and final reading the first phase of that tax reform agenda.

The measure involves, among others, the reduction of individual and corporate taxes, removal of exemptions from value-added tax (VAT), imposition of higher fuel excise taxes and increase in the taxes on motor vehicles.

As expected, the businesses that would be hit by a spike in taxes on their operations expressed opposition to their being singled out to make up for the expected dip in collections from individual and corporate taxes.

The tax scheme may be likened to asking a family member to cough up more money to pay for the household’s needs because another member is unable to give his usual share due to financial constraints.

For one, dealers of luxury cars are worried that the imposition of higher taxes on their products would shrink their sales and, in the process, affect their ability to expand their business.

Real estate brokers and building contractors are apprehensive that the removal of the VAT exemption on low-cost housing would make housing units less affordable for low income families and, as a result, aggravate the country’s housing shortage.

When the Senate takes up the House-approved tax measure, expect the business organizations concerned to do a full court press on the senators to convince them to reduce, if not remove, the new or higher taxes proposed for their sources of livelihood.

If they succeed in making the senators look at things their way, they have to suggest alternative sources of revenue or other means to fund the projects that the administration wants to implement.

Ranged against the companies’ advocates are the administration’s economic managers who have presented strong and convincing arguments for the enactment into law of the tax reform agenda.

There will be a test of wills on this issue. If the President gives full backing to his economic managers and cracks the whip on his allies in the Senate to tow his advisers’ line, the opposition of the businesses concerned would go to naught.

If he stays on the sidelines and lets the legislative mill take its usual course, the bill would either be watered down or get stuck in the Senate.

The opposition to new and increased taxes is understandable.

Assuming the affected businesses’ concerns are valid, they could suffer some contractions in operations (and profits) if the taxes take effect.

But that’s how the cookie crumbles in business.

There are no guarantees for its survival, much less profits. It has to learn to adapt to changes in the conditions in its market and the regulatory environment it operates in.

This early, the affected businesses have to brace for tough days ahead and make the necessary provisions for their continued operation.

Their executives would have to find inspiration from businesses in the past that went through the problems they now find themselves in, but managed to turn, in a manner of speaking, lemons to lemonade. As the saying goes, what does not kill you, makes you stronger.

Taxes are the lifeblood of the government. Unless declared oppressive or confiscatory by our courts, compliance with tax laws is mandatory.