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Pending tax reform bills

With less than a year to go in the Duterte administration, its economic managers are steadfast on their objective to reform the country’s tax system.

Recall that shortly after President Duterte came to power in 2016, the Department of Finance (DOF) announced a comprehensive tax reform program consisting of four packages that aim to increase revenues by tapping new tax sources, updating tax rates and rationalizing the grant of tax privileges.

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The notable accomplishments in that direction are, among others, the enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) Law in 2017 and the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE) last April.

In both laws, the President certified the urgency of their enactment to get them out of the legislative logjam. To the credit of government offices concerned, the appropriate implementing rules and regulations for those laws were promptly issued.

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In a recent forum, Finance Secretary Carlos Dominguez III said the DOF would pursue efforts to convince Congress (whose last session started yesterday) to pass the amendments to the Foreign Investment Act, the Public Service Act and the Retail Trade Liberalization Act.

Going further, he also wants Congress to pass the proposed Real Property Valuation and Assessment Reform Act and the Passive Income and Financial Intermediaries Taxation Act.

There is no question these bills are meritorious. Our tax system needs them to enable the government to meet the challenges of continued population growth and a highly competitive world economy.

Unless Congress speeds up its deliberations on those bills or the President certifies to their urgency, Dominguez’s call for their enactment would be a classic case of, to quote a popular saying, “wish ko lang (I wish).”

In theory, Congress has 12 months from yesterday to act on those proposals. But note that next year is an election year for national and local offices and the period for filing of candidacies for those positions is from Oct. 1 to Oct. 8, or about two months from now.

Past experience had shown that when the period for the filing of candidacies starts, the legislative process practically grinds to a halt because the entire membership of the House of Representatives and one-half of the Senate are already on a campaign mood and in the hustings.

That means committee hearings to study those bills would not be easy to convene or getting a quorum to discuss and vote on them in plenary could be problematic.

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Note that it took Congress more than a year to enact the TRAIN Law in spite of the fact the President’s political allies controlled both chambers. What’s more, he had to certify its urgency to expedite legislative action on it. The CREATE Act went through the same scenario.

Bear in mind, too, that the bills the DOF wants Congress to enact are not simple or uncomplicated that their in-depth review could be dispensed with or the filling up of “omissions” in their provisions can be lawfully delegated to the government offices concerned.

A cursory look at the bills’ titles shows they relate to or could affect significant individual and business financial interests in the same manner the two laws mentioned above have done.

No doubt, the businesses that stand to be adversely affected by those bills would put a strong stand against them either by having the salient provisions diluted to their benefit or work for their indefinite shelving.

The ability of the business lobby to influence legislative action cannot be sneered at, especially with the 2022 elections just around the corner. Time and again, business conglomerates in the country have shown their clout in fending off the enactment of laws that may substantially reduce their bottom line.

Given these circumstances, the remaining packages of the DOF’s comprehensive tax reform program may have to wait for the next administration, that is assuming the incoming president would have the same approach on the improvement of the country’s existing tax system. INQ

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