Duterte steps in for tax reform

MALACAÑANG is pulling out all the stops to smooth away legislative difficulties of its tax reform, after President Rodrigo R. Duterte bared in a press briefing last Monday with both heads of Congress that the bill has met “resistance” and “rough sailing” among lawmakers.

Mr. Duterte met with 15 of the 18 senators of the majority bloc over dinner in Malacañan Palace last Tuesday — a day after meeting with Senate President Aquilino “Koko” L. Pimentel III and Speaker Pantaleon D. Alvarez — partly to discuss the first of four tax reform packages that has encountered hurdles in the House of Representatives Ways and Means committee and which faces even more questions in the Senate.

“[T]he President and the senators exchanged views on vital legislative agenda currently pending in the Senate. Among the pending bills they discussed were the proposed emergency powers to solve the traffic problem in Metro Manila and the proposed comprehensive tax reform package, which seeks to realign the reve- nue collection of the government, boost the available income of taxpayers, while guaranteeing the healthy operation of the government and the country’s inclusive development programs,” Presidential Spokesperson Ernesto C. Abella told reporters via text message, adding that the revived “war on drugs” was also discussed.

The proposed traffic emergency powers, Senate President Pro-Tempore Ralph G. Recto told reporters yesterday, “was tackled briefly, but he (Mr. Duterte) said that he could do with it or without it; better [if ] he has it.”

“We discussed the proposed tax reform,” Senator Joseph Victor G. Ejercito said in a March 14 social media post on the dinner.

Asked particularly what Mr. Duterte discussed regarding tax reform, Senator Juan Edgardo “Sonny” M. Angara, chairman of the Senate Ways and Means committee, told reporters separately yesterday: “He was just asking for support, no specifics.”

But Mr. Ejercito, who heads the Senate committees on Urban

Planning, Housing and Resettlement as well as on Health and Demography, told reporters yesterday that senators discussed their apprehensions with the first tax reform package.

The four- package tax reform program is designed to shift overall tax burden away from low wage earners towards those who can better afford such levies, while yielding more net revenues to help finance the administration’s infrastructure drive.

In its configuration as of Jan. 30, the first package was to result in P139.6 billion in foregone revenues from lower personal income tax, estate tax and donor tax rates as well as raise an additional P302.1 billion from reduced VAT exemptions, as well as increased excise taxes on cars and oil products, yielding P162.5 billion in net revenues in the first year of implementation.

The entire program, in turn, is designed to backstop the Duterte administration’s plans to hike infrastructure spending to 7.1% of gross domestic product by 2022 — the year it steps down — from a programmed ratios of 5.4% this year and 5.1% in 2016.

That first package — under House Bill No. 4774 which is based on a draft submitted by the Finance department in September last year — was supposed to have been approved last Tuesday by the House Ways and Means committee, which returned it to a technical working group in order to consolidate it with several other similar proposals. In processing the first package, the committee had occasionally worried the Finance department by focusing more on tax cuts and less on revenue- generating measures meant to plug collections to be foregone. The committee, for instance, rejected the department’s proposal to remove value added tax exemptions of senior citizens and the disabled.

In a statement yesterday, however, Finance Secretary Carlos G. Dominguez III welcomed the decision to approve “tax reforms as a package rather than on a piecemeal basis,” describing this move as “a step closer for Congress to help the Duterte administration fund its ambitious agenda to sustain the high-growth momentum, dramatically cut poverty and transform the country into a high middle-income economy by 2022.”

The Finance department said in its statement yesterday that still hopes both chambers of Congress will approve the first package “possibly by the middle of this year.”

But Mr. Ejercito signaled that the measure could face even more rough sailing ahead when the Senate tackles it.

“The President found out that there are some senators who have some apprehensions, who found the proposed tax increase too high,” he told reporters.

“For example, I’m not in favor of the increase of taxes in petroleum products, the others on the excise tax,” he explained.

“Although we favor the increase, it’s just too steep. So, we want to discuss further how we can come up with an acceptable tax reform package.” —

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