DOF sees swift Senate OK of tax plan

The Department of Finance (DOF) remains optimistic the tax reform bill will swiftly get the approval of the Senate following President Duterte’s appeal for the urgent passage of the measure during his second State of the Nation Address (SONA) last Monday.

“With the President’s certification of the TRAIN (Tax Reform for Acceleration and Inclusion Act) as an urgent and a priority measure, complemented by the personal appeal he made before our lawmakers in his SONA, we are hopeful the Senate will pass the measure soon enough so it could be implemented possibly by the third or fourth quarter of the year,” Dominguez said in a statement.

Last May, Duterte sent a letter to House Speaker Pantaleon Alvarez and Senate President Aquilino Pimentel III certifying the tax reform bill as a priority measure which needs immediate approval from the Congress.

During his speech, Duterte said the reforms proposed in the TRAIN bill are “designed to be pro-poor, especially when the people understand how the revenues will be spent.”

“The poor and vulnerable are at the heart of my tax reform. Your support would ensure that the benefits of the tax reform can be felt immediately by them,” he said.

The second State of the Nation Address (SONA) of President Duterte departs from the typical formula.

Instead of the heavy recounting of the previous year’s developments and achievements with a plethora of statistics, he zeroes in on actions being undertaken.

An unusual SONA. Duterte’s SONA got into business immediately, going through the specific issues and topics that highlight the significant developments of the current period. His textual delivery was interlaced with long and informal adlibs that allowed his unruffled emotions to show. The adlibs happened long enough to cause the speech to last two hours. The breaks in the speech allowed him to get to the heart of the matter in his personal way.

Inevitably, too, these ended in rants or complaints that were laced by expletives and irreverent language. Such moments allowed him to create and capture a folksy atmosphere, a bond with his listener. At the same time, however, these are the very same moments his critics highlight to regard him as rough and crude.

Yet, even as the words are spoken only within the august halls of Congress, they reverberate throughout the nation through the wonders of modern communication technology. Do we then wonder why his survey approval ratings as president have reached sky high? SONA coverage, highlighted for economic development. The SONA covers many important topics. The rationale for the martial law declaration in Mindanao, the discussion of environmental protection and the need for the mining industry to reform, the return of the bells of Balangiga that highlight huge symbolisms in USPhilippine relations are by themselves important topics.

But I focus only on five important issues which I think will have great impact on economic development for the immediate years to come. These are as follows: (1) The tax reform bill, now in the Congress. (2) Going after big tax-evaders. (3) Direct plea to the Supreme Court to lift the temporary restraining order (TRO) that has bogged down the implementation of the country’s family planning program.

(4) Direct admonition to the Commission on Audit to review the lowest bidder requirement in public expenditure procurement.

(5) His threat to end the negotiation with the communists.

For lack of space, I choose these topics to emphasize decisions which have significant impact on immediate and long term economic performance.

Tax reform. I have said before that the tax reform program is an economic game changer for the country. The House of Representatives has passed the bill.

The Senate has temporized. President Duterte directly asked the upper house to pass the version he recommends to help his economic program.

There is a great likelihood the Senate will comply. When the bill is passed, the nation will get a major overhaul of the tax system, making it more revenue productive.

The personal income tax rate will be reduced and will benefit many income earners with the reductions. However, increases in indirect taxes are forthcoming and they signal sacrifice for many.

There is a countervailing expenditure program designed to transfer benefits and income support to the poor. Thus, the regressive nature of the indirect taxes on energy and the changes sought to make the VAT (valueadded tax) more revenue-productive will be mitigated by programs to help the poor.

The tax reform measures will make the infrastructure program move forward in a big way.

Going after tax evaders. He cited the government’s efforts to improve tax administration and to deal with big tax offenders.

The President announced that the Department of Finance would accept the offer of a settlement from Mighty Corp. amounting to P25 billion, even as the same taxtransgressor is sold to another corporation which would effectively end Mighty’s existence as a business entity.

Instead of getting embroiled in a long litigation with an uncertain outcome, such a compromise would bring in additional revenues that could be used for the reconstruction of Marawi and the other needs of the government. The Supreme Court and the TRO on family planning. President Duterte appealed directly to the Supreme Court before the nation to act finally on the temporary restraining order (TRO) that it issued against the implementation of a specific family planning assistance to poor families seeking support from the government.

Action on the TRO would help to resolve a major issue in the country’s fight against poverty. The Supreme Court TRO has muted the effectiveness of the family planning component in helping poor families that wish to reduce the size of their family. The bane of the lowest bidder in government procurement. President Duterte appealed to the Commission on Audit (COA) to understand more fully the problem of the “lowest bidder” rule in devising public procurement processes.

He explained that such process abets greater corruption in government, creating not only very badly executed projects by poorly chosen contractors, but also results in poor quality projects.

He cited situations in which the desire to get the lowcost bids end up creating situations that are a great disadvantage to the government. He, therefore, admonished COA to review its policies.

Negotiations with the communists. Though President Duterte spent a large part of his SONA on the Muslim problem in Mindanao, he reserved his greatest ire on the intransigence of the communists in the negotiations to end their rebellion.

During the process of negotiations, the NPAs in the field have on many occasions come out to engage with government troops despite the existence of a truce. His own presidential convoy was even the target of an ambush recently in Mindanao.

The President expressed his disappointment over the failure of the communists to come to terms with the government despite his efforts to extend them all the opportunity to do so. They are unable to control their men in the field. The freed NPA negotiators, President Duterte said, are like tourists who keep on attending meetings with no outcome.

President Duterte’s frustrations with the negotiations led him to focus his anger at Jose Ma. Sison, whom he considered sick (with colon cancer), old, and out of touch.

The President said he would now expend more resources on raising the military budget to hire soldiers and he would crush the NPA. He further taunted the NPA that they have no place in any ISIS government (which, of course, he would not allow to succeed in the country).

My email is: gpsicat@gmail.com. Visit this site for more information, feedback and commentary: http://econ.upd. edu.ph/gpsicat/