TRAIN: Interview with Senator Sonny Angara
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TO me, one of the highlights of Duterte’s second Stateof-the-Nation Address (SONA) was not necessarily his cusses and anti-Western tirades. It actually came towards the end of his speech, when he half-jokingly taunted the Senate – particularly Senator Sonny Angara who is the influential chairman of the Ways and Means Committee – to be more cooperative vis-à-vis one of his priority bills: The Tax Reform for Inclusion and Acceleration (TRAIN).
In recent weeks, I have tried to dig deeper and evaluate the pros and cons of the TRAIN reform package. It is an issue I will be writing on more often in coming weeks. The following, however, are excerpts from my interview with Senator Angara on the TRAIN issue, which I think is extremely helpful in order for people to understand the high stakes involved:
Heydarian: What is the current state of debate in the Senate visà-vis the Tax Reform for Inclusion and Acceleration (TRAIN) bill? What are the outstanding areas of concern? In its current form, how consistent is this with the tax reform advocacies and proposed bills by you and your father? How to ensure the final package is truly inclusive and sustainable?
Senator Angara: Our committee is set to hold a final set of hearings to scrutinize the TRAIN bill passed by the House of the Representatives. We are taking note of the comments and counterproposals of the affected sectors and various stakeholders, and we are closely coordinating with our colleagues in the Senate and our economic managers in order to come up with a pro-people reform.
Among the contentious parts of the TRAIN are the adjustment of the excise taxes on oil, the imposition of taxes on sugar-sweetened beverages (SSB), and the lifting of the VAT exemption of socialized and low-cost housing. We will work to ensure that our low-income earners will not be unduly burdened by the proposed new taxes — i.e.: 1) Instead of the 3-2-1 increase in oil tax, we are looking at a more gradual phasing of 1-2-3 so the adjustment will not be too shocking for both our economy and the consumers. 2) Instead of 110 per liter of sugary drinks, we are looking at imposing taxes based on sugar content, which is more reasonable since the DOF said SSB tax is primarily a health measure. Milk, considering its health benefits to our children, should not be taxed the same way as softdrinks. 3) The country’s housing backlog now stands at 6 million units, and the proposed lifting of VAT exemption of socialized and low-cost housing may exacerbate this problem. We are studying this issue carefully.
We have been pushing for the lowering of income taxes since the past administration, and it concerns me that while we are giving out 1140 billion with the right hand — by easing the tax burden of our middle class — we are collecting more or double the taxes with the left hand, affecting the poorer sectors. We will strive to find a balance to achieve both goals: To give tax relief to ordinary Filipinos and, at the same time, to fund the infrastructure projects and social protection programs of the government. In the earlier stage of the TRAIN, we fought for the retention of the tax benefits of senior citizens and persons with disabilities, which my father and I advocated for.
Heydarian: Do you foresee the bill’s passage before October? How crucial do you think the swift and timely passage of bill is for the country’s economic well-being, including investor confidence, infrastructure development and credit rating?
Senator Angara: I am confident that the committee can come up with a good version that includes inputs from my colleagues and report it to plenary by September. When it reaches plenary, the pace of the deliberation will be up to the Senate leadership and the other senators. I’m sure our colleagues will prioritize the passage of the bill with the president’s certifying the bill as urgent.
Our economic managers believe that the passage of the tax reform bill will boost the Philippines’ credit rating because it will provide government with a fresh revenue stream. A number of my colleagues would like to see first that the administration has the capability to spend the budget and implement projects and investments (or what we call absorptive capacity). In previous years, generating funds was not the major bottleneck to infrastructure buildup, but weak absorptive capacity of implementing agencies. In fact, unused appropriations for 2016 hit more than half a trillion pesos or 1589 billion. We want to ensure that the present administration will not face the same problem again, and we have asked our economic managers to present before the Committee of the Whole (all senators are members) the administration’s infrastructure plans and show us where and which projects they intend to use the revenues to be collected from the tax reform.
We would also improve and strengthen the language of the earmarking provisions of the bill to help gain acceptance with the senators and the wider public. We would aim to make the bill complete in itself — from finding the ways and means for funding the projects to the spending of the money or the specific allocations.