Tax reform uncertainty to persist

KJ ROSALESBy Charmaine A. TadalanReporter
THE REMAINING PACKAGES of the tax reform program — a key support of the government’s P8-trillion stepped-up infrastructure development push, will continue to face uncertainty in the new 18th Congress that opens on July 22, according to one legislative leader.
Asked on prospects of future tax reform bills after two earlier measures were watered down after going through the eye of a needle in both chambers of the 17th Congress, Senate President Vicente C. Sotto III said in a mobile phone message on Monday that this and other priorities will be “up for discussion with the executive department after elections.”
“We need to discuss. It’s touch and go,” said Mr. Sotto, who is one of the 12 incumbent Senators who will serve in the 18th Congress.
The country will be voting for a new House of Representatives and half the Senate, besides a host of local government positions on May 13.
A Global Markets Research note released by Nomura International (Hong Kong) Ltd. on April 11 said President Rodrigo R. Duterte will likely have enough allies in Congress to push remaining tax measures after elections, citing his consistently high public satisfaction ratings.
The Department of Finance (DoF) said separately that it will continue to impress on lawmakers — especially newly elected ones — the indispensable role tax reforms play in shifting the tax burden on those who can afford to pay more, increasing collections in the process that will help fund improvements in social services and infrastructure. By law, all tax measures have to emanate from the House.
“We will continue our efforts to convince about the economic benefits of the tax packages,” Finance Assistant Secretary Maria Teresa S. Habitan said in a mobile phone message on Tuesday.
“DoF has been consistent in our advocacy to have the remaining tax reform packages passed by Congress as soon as possible. We believe that the Senate is still able to do its part in making this happen. Otherwise, we will again submit the tax reform packages to Congress,” she also said.
The 17th Congress, now on a Feb. 9-May 19 break for the May 13 midterm elections, will have just May 20-June7 to act on remaining legislative measures. Mr. Sotto had said on March 20 that it was “doubtful at this point” that his chamber could approve any more tax reforms in those remaining session days. Bills left unapproved by both chambers at the end of that period will have to be refiled in the 18th Congress.
Mr. Duterte has so far signed two tax reforms into law, while bills providing three more tax reform packages have bagged final-reading approval at the House of Representatives but remain at committee level in the Senate.
Enacted were Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which slashed personal income tax rates and increased or added levies on various goods and services, besides removing several value added tax exemptions, as well as RA 11213, or the Tax Amnesty Act, which grants estate tax amnesty and amnesty for delinquent accounts that remained unpaid even after being given final assessment by the Bureau of Internal Revenue.
Other tax reforms pending in the Senate Ways and Means committee entail bills to reduce corporate income tax rates and remove redundant fiscal incentives, simplify the tax structure of the financial sector, centralize real property valuation and assessment; increase government share in mining revenues and even higher excise tax rates for alcohol and tobacco products.
Asked if such uncertainty will push Mr. Duterte to intervene again to push tax reforms, Presidential Spokesperson Salvador S. Panelo replied: “Hindi, kasi alam na ng members ng Congress ang mga projects ng Presidente (No need, since members of Congress know the President’s projects).”
“If they’re supportive, they will support it.”
TRAIN was heavily watered down as it went through both the House of Representatives and the Senate, even after Mr. Duterte had talked to lawmakers in early 2017 and made a veiled threat in a State of the Nation Address afterwards about withdrawing support for the candidacy of one Senate leader come elections.
For Ateneo Policy Center senior research fellow Michael Henry Ll. Yusingco, a lawyer, much will depend on Mr. Duterte’s public satisfaction ratings in the second half of his term, which ends in mid-2020.
“I do not think tax reform will be a priority of Congress this year. Maybe it will be tabled early next year, if at all. Depends on the popularity of President Duterte by that time. If his trust ratings remain very high, then the administration may still have a decent chance at pushing tax reform legislation,” he said via e-mail, Monday.
“But if his trust ratings slide down to poor or bad, then the administration will likely abandon any tax reform initiatives. And Congress will not be keen by then to touch this matter for sure.”
Mr. Yusingco added Congress is more likely to focus on charter change and reforms in the water and power sector, in light of the recent crises.