Tax reform waiting game

The clock is ticking on the administration’s tax reform agenda. With roughly two and a half years remaining in President Duterte’s term, the changes in the country’s tax system his economic managers announced at the start of his administration may not be completely achieved.

So far, only two of those measures—the Tax Reform for Acceleration and Inclusion (TRAIN) and Tax Amnesty Act of 2019—have been enacted into law.

These laws have enabled the government to raise additional funds on a continuing basis for its infrastructure and social alleviation programs.

Although the administration’s political allies control the two chambers of Congress, it took more than a year for each and a presidential certification of urgency for those laws to come to fruition.

The tax reform bills that are pending in Congress include, among others, easing the confidentiality of bank deposits on tax evasion cases, reforming the property valuation system and the Tax Reform for Attracting Better and High-quality Opportunities (Trabaho) bill, which aims to reduce corporate income tax rates and rationalize fiscal incentives.

In light of concerns raised about the adverse effects of the Trabaho bill on companies operating in export processing zones that may result in massive employment loss, the Department of Finance went on a media blitz last year to inform the public of its benefits to the economy.

Getting the pending tax bills approved by the House of Representatives is a foregone conclusion. It’s a cinch.

With Rep. Joey Salceda, chair of the House Ways and Means Committee, pushing them, it’s just a matter of time the bills would pass muster in the House and be sent to the Senate for its consideration and approval.

Judging from the experience in the TRAIN and Tax Amnesty laws, the senators may not be as enthusiastic as their House counterparts in tackling the pending tax bills.

Although Senate President Vicente Sotto III had said the Senate would give priority to those measures, there was no assurance his colleagues would oblige him since they have their own priorities in their legislative agenda.

If the economic managers want the administration’s tax reform agenda to be in force as soon as possible, they have to enlist the active participation and support of the President.

Although they enjoy the senators’ esteem, there is only so much that respect can do in expediting committee hearings, preparing committee reports and submitting the drafts of the proposed laws for plenary discussion.

The economic managers cannot let things go the normal way because the businesses that would be adversely affected by the pending bills would not idly stand by while their financial viability is under threat.

Expect them to do everything possible (both legal and extralegal) to derail their enactment or water down their provisions to mitigate their effects on them.

The lobbying muscle of some companies is common knowledge in the political circles and, with the national elections around the corner, they are sure to flex it before political wannabes with limited resources.

The most effective antidote to such lobbying efforts is either a personal call from the President or his meeting with key congressional leaders to “request” them to pass the bills in the form and shape the economic managers want them.

It’s not easy to turn down a request from a sitting president, more so if he continues to enjoy a high level of support from the region he comes from.

As soon as the desired drafts of the tax bills are firmed up, a presidential certification on the urgency of their passage will assure their quick enactment into law.

We are now on a waiting game for those bills. Hopefully, they will come out unscathed from the legislative mill.

Taking into account how earlier tax bills went through the wringer, getting 50 percent of them approved should be considered a victory already. INQ