Onset of early election fever

The economic team of President Rodrigo Duterte will have to work double time if they want to see the passage into law at the 17th Congress of the second package of the proposed tax reforms program dubbed as Tax Reform for Attracting Better and High-Quality Opportunities, or TRABAHO bill. The Senate stepped on the breaks after the House of Representatives fast-tracked approval of the TRABAHO bill on third and final reading last Monday.

Understandably so because there are at least seven Senators who are up for reelection in the coming mid-term elections on May 13,2019.

Being identified with unpopular tax measures might dim chances of being reelected into office, especially amid formidable rivals in the Senate race next year.

The Commission on Elections already approved the appeals of the Senators and Congressmen to delay by two weeks the filing of certificates of candidacy (CoCs) for those running for the mid-term elections that was reset to Oct. 11-17. The resetting of the filing of CoCs will coincide with the scheduled one-month recess of Congress starting Oct. 11.

But a technocrat-turned-politician Albay Rep. Joey Salceda who is seeking a second term in his congressional district, is bravely taking up the cudgels to push the approval into law of the TRABAHO bill as one of its principal authors. Salceda believes once approved into law, TRABAHO bill will transform the Philippines as the best place for investments in this part of the world.

Salceda, along with Finance assistant secretary Antonio Lambino discussed with us at length the basic features and come-ons of TRABAHO bill during our Kapihan sa Manila Bay last Wednesday at Cafe Adriatico in Remedios Circle, Malate. We also invited as reactors in our weekly news forum ALU-TUCP vice president Louie Corral and Ed Cutiongco, vice president of Petroleum Association of the Philippines.

Salceda is also the brains behind the first tax reform package dubbed as TRAIN (or Tax Reform for Acceleration and Inclusion) that President Duterte signed into law last year. The TRAIN Law took effect in January 1 this year and is currently being blamed as largely behind the rising prices of goods and services in the country as measured in terms of inflation rate.

Lambino credited the Albay Congressman for crafting TRAIN-1 which has so far generated additional government revenues that are now being funneled back to the Filipino people through such socio-economic amelioration programs like the fuel subsidy to public transport, the incremental cash subsidy allowances under the 4 P’s, college tuition fee subsidy, etc.

Like TRAIN-1, Lambino underscored the need for the 17th Congress to pass into law the TRABAHO bill designed to further improve the Philippine economy by providing tax incentives “for the right reasons” and time-bound tax holidays. This should correct the existing tax incentive system, he pointed out, that were being perpetually enjoyed by companies registered in Philippine Economic Zone Authority (PEZA) and the Board of Investments (BOI).

For his part, Cutiongco welcomed the House-approved version of the TRABAHO bill which did not remove the tax incentives to prospecting companies involved in gas and oil explorations. Speaking for small players in this upstream sector of the oil industry in our country, Cutiongco echoed the fears and concerns of their group when they learned about the original version of the TRABAHO bill sought to repeal three specific provisions of a Marcos edict, Presidential Decree (PD) 87 which opened up the Philippines to big oil explorations that led to the discoveries, among others, of the rich deposits of natural gas in Malampaya.

Originally, the TRABAHO law sought to repeal the provision giving incentives to oil and gas contractors that were instituted by PD 87. “This has the energy sector concerned since oil and gas exploration and development is capitalintensive which would require foreign investors to provide equity into projects,” he explained. Instead of encouraging new energy investors to come up with similar projects, he said, the TRABAHO bill may just drive prospective energy investors away to put in money into the country’s oil and gas sector.

This comes at a time the industry is already reeling from the impact of the Commission on Audit (COA) decision in 2009 to slap P53.14-billion tax deficiency to the Malampaya project, the country’s largest gas development to date. The Malampaya project is one of the most successful Public-Private Partnerships in the history of the Philippines. Malampaya supplies up to 30% of the country’s power needs. Through its 16 years of safe and reliable gas production, the Malampaya project has reportedly remitted US$10 billion to the Philippine government.

Cutingco believes new and prospective energy projects much like his own company – the Alegria Oil Field in southern Cebu – might be jeopardized should their existing tax incentives be repealed. He is the country manager and director of his company’s Manila office. According to him, the Alegria Oil Field can power a 60-megawatt (MW) gas plant. This will help supply power to Cebu and nearby provinces in Visayas.

Cutiongco hopes the Senate will adopt the House-approved version of the TRABAHO bill so as to help promote more explorations of natural gas and possibly oil in the West Philippine Sea.

The labor groups through ALU-TUCP representative was able to secure during our Kapihan sa Manila Bay news forum the commitment of Congress to ensure labor concerns against companies engaged in so-called “endo” jobs (end of contract) to be screened out of the intended tax incentives of the TRABAHO bill.

Speaking for the ALU-TUCP, Corral promises support to the TRABAHO bill through their partylist representative in the 17th Congress Rep.Raymundo Democrito Mendoza if the TRABAHO bill and TRAIN Law could provide “safety nets” to minimum wage earners who always bear the brunt of the tax impact to prices of basic goods and services.

In the meantime, corporate business interests brace for TRABAHO if it hurdles the early onset of election fever in our country.

Being identified with unpopular tax measures might dim chances of being re-elected into office, especially amid formidable rivals in the Senate race next year.