Saturday, December 16, 2017
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Breaktime

Leaking tower of Peza

The administration of the motorbike-riding Duterte Harley can now to put to the test its vaunted clout in Congress.

When push comes to riot, as the administration tries to ram its priority bills through the legislature, can its political “allies” deliver?

The administration has the next 10 working days to squeeze two important measures through this preoccupied Congress: the 2018 budget and the tax reform called TRAIN.

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Endorsed by Duterte Harley himself as priority bills, the measures will go through the bicameral committee, with Congress about to start its break on Dec. 16.

The national budget of P3.8 trillion happens to be the first full-year budget that the Duterte Harley administration formulated all by itself.

The Senate version removed more than P50 billion in the budget for “right of way” acquisition for the infrastructure program.

Thus, House Speaker Pantaleon Alvarez already talked about a “reenacted” budget, meaning, the administration would have to make do with a recycled 2017 budget of P3.3 billion, or about P500 billion less.

As for the tax reform program, the rather engaged Senate passed its version only last week, more than five months after Duterte Harley certified it as top priority.

The Senate also just had to insert some never-heard-of-before tax measures at the last minute—i.e. no public hearings, no open discussions and such.

One senator explained that the senators traditionally never really followed the wishes of the administration.

I see—and so they just had to consider the interests of lobby groups?

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Anyway, congressmen already took issue against the hefty increase in the excise tax on coal in the Senate version, which Sen. Loren Legarda initiated.

Coal tax would increase by 3,000 percent, from the present P10 per metric ton (pmt) to P100 pmt in 2018, P200 pmt in 2019 and P300 pmt in 2020.

The drastic measure was not in the House version, and congressmen noted that all tax measures should actually come from the House.

It so happened that, as a policy, the government leaned toward coal power plants, being the cheapest form, versus solar or bunker fuel.

Official figures showed that, out of some 90 million megawatts of power generation in 2016, coal accounted for some 43 million megawatts, or roughly 48 percent.

The sudden big increases in the coal tax could thus hurt the economy.

The surprise coal tax also came about because the Senate mangled the tax proposal of Duterte Harley, who asked for P146 billion in new revenues from those increase in excise tax on oil, cars and sugared drinks, which the Senate version watered down to P90 billion.

Thanks, some said, to intense lobbying!

Still, the strongest lobby actually came from businesses that, for many years, wallowed in the many VAT exemptions that they from Congress them over the years as special laws.

All in all, there were 156 lines of VAT exemptions, but the administration proposed to remove some 67 lines, expecting to raise some P62 billion in additional revenues.

Surprise— the Senate committee version would only raise P14 billion.

Now, we the only country in the world where the legislature could amend the general law (the National Internal Revenue Code) to award special VAT exemptions left and right to different lobby groups.

Believe it or not, the special laws actually added 84 lines of exemptions.

We had special laws for instance providing wholesale exemptions for locators in special economic zones, including those accredited by Peza, the Philippine Export Zone Authority.

Now, Peza could actually register anything at all, including buildings and malls, and mere suppliers of exporters or “dollar earners” like BPOs also got exemptions.

One estimate in the Department of Finance put the VAT leakage in Peza-registered zones at P200 billion a year, almost the same as the estimated leakage from smuggling.

And with all that sacrifice, how did our exports fare?

Official figures showed that our total exports came up to about $60 billion plus in the past few years.

In comparison, Vietnam posted annual exports of more than $180 billion. With only 25 lines of VAT exemptions!

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