AT a meeting of Senate and House leaders last March 13 on their common legislative agenda, the senators came away with a list of 39 measures they wanted passed before the 17th Congress bows out in 2019, of which 15 are economic bills.
Besides this list, the lawmakers knew at that time they still had to tackle several other key measures—the Bangsamoro Basic Law (BBL), the Fair Election Act, and federalism and Charter change that they expected would end up with them once President Duterte’s handpicked Constitutional Committee is done with its work.
Topping the economic measures was of course the rest of the tax reform package, or the sequel to the Tax Reform for Acceleration and Inclusion (TRAIN) law that took effect on January 1.
Fast forward to July 23, as President Duterte delivers his third State of the Nation Address. To the relief of many quarters, there were no rambling, ad lib portions; no expletives or insults; just a calm, simple delivery of a speech that lasted 48 minutes and packed with at least 15 key legislations and issues that the Chief Executive pitched to Congress.
Atty. Raul Lambino, lawyer of newly installed Speaker Gloria Macapagal-Arroyo and vice president for international affairs of the PDP-Laban, said the leadership of Arroyo is expected to pass all the economic measures of the Duterte administration this year.
“All the economic measures will be prioritized by [Speaker Arroyo] this year,” he said in an interview.
Duterte in his Sona asked members of the 17th Congress to prioritize the passage of several economic measures to augment government coffers for the delivery of social services.
The President sought urgent passage of: rice tariffication, the second package of the tax reform law, lowering of interconnection rates between telecommunications industry players, universal health care, end of contractualization, a national land use law and environmental protection, among others.
In his Sona, Duterte dwelt at length on the BBL, since renamed to Bangsamoro Organic Law (BOL) or the Bangsamoro Organic Law on the Autonomous Region in Muslim Mindanao (BARMM). But since Congress’s bicameral conference committee cochaired by Sen. Juan Miguel Zubiri and House Majority Leader Rodolfo Fariñas had worked overtime during the break to hammer out a compromise version of such a complicated piece of legislation with transcendental implications, at least that task was already completed by the time Sona day rolled around. And all the two chambers had to do was ratify the bicameral conference committee’s output and send the measure to Duterte, who promised to sign it “within 48 hours” of getting the same.
In contrast to the generous pitch for the Bangsamoro, Duterte did not—as analysts and business groups noted—sound as gung-ho on Charter change, although he thanked profusely the chairman of the Constitutional Committee he handpicked to draft a federal charter, former Chief Justice Reynato S. Puno.
Business leaders interviewed by the BusinessMirror a day after the Sona expressed some relief about the President’s applying the brakes on Charter change, as they had worried over the additional bureaucratic layers and more tax burdens that a shift to federalism might entail.
On Wednesday, Senate President Pro Tempore Ralph Recto said senators are not keen on supporting Cha-cha amid concerns “it will bloat the government. It will mean another layer and a bigger tax burden that would lead to a credit downgrade,” said Recto, adding that it is better to focus on job creation and fix inflation.
He stressed that “Congress cannot rush Cha-cha,” and “senators need to study the issue.”
Tax reform
The BBL or BARMM and the Cha-cha aside, at least four items on the President’s Sona wish list were coincidentally on the common legislative agenda that was drawn up after the March 23 Senate-House meeting, and therefore these are expected to take priority attention from legislators.
Topping the list of these four items that are common to both the Executive and the Legislative agenda is the rest of the tax reform package under TRAIN, which will include a tax amnesty, corporate income tax reduction, rationalization of fiscal incentives, and higher tobacco and alcohol taxes, and a comprehensive mining tax reform.
Following Duterte’s appeal for Package 2 of TRAIN, the House Committee on Ways and Means on Tuesday immediately buckled down to work.
Led by committee chairman Dakila Carlo Cua of Quirino, the panel convened for a DOF briefing on the cost-benefit analysis of Package 2 as well as on House measures advocating for lower corporate income tax rate.
Finance Undersecretary Karl Kendrick Chua said the Philippines has one of the highest corporate income tax rates in the region at 30 percent. The government, however, collected only 3.7 percent of gross domestic product in corporate income tax revenue.
“That is a revenue productivity of 12.3 percent. Compare that with Vietnam, Malaysia, or Thailand with much lower rates of 20 percent or 24 percent, but they collect 4 percent, 6 percent, or 7 percent of GDP, respectively, with much, much higher productivity,” Chua said.
“On the other hand, we have a very complicated tax incentive system. We grant the most generous fiscal incentives since they are in lieu of all taxes, both national and local, and given forever,” he said.
In Package 2, he said the government’s main objective is to arrive at more fair and accountable tax incentives. “Because every peso granted as tax incentive is a peso off the budget that could have been spent for infrastructure, health, education, and social protection.”
To be sure, deliberations on the second round of tax reforms are bound to be tough, given the huge clamor for lawmakers to first revisit the original TRAIN that took effect last January 1, in order to satisfy various sectors who insist that the so-called TRAIN played a big role in the higher-than-expected inflation posted in April, May and June.
The review of the TRAIN, however, is not seen to derail deliberations on the rest of the tax reform package, given that most stakeholders acknowledge their importance to the economy.
Moreover, the last two items on the second batch of tax reforms—taxes on tobacco and mining—are seen to be among the key sources for funding the universal health care act, also listed as a priority for both Executive and Legislative.
Universal health care
Besides shepherding the tax reform packages, Ways and Means committee chairman Sen. Juan Edgardo Angara had earlier told the BusinessMirror he strongly pushes his friend and “seatmate” Sen. Joseph Victor Ejercito’s advocacy for universal health care.
Ejercito, chairman of the Senate Health committee, had conducted a marathon hearing on the bill in March, and has promised to fast-track the process of enacting the law now that Duterte himself has endorsed it.
Asked whether the universal health care that he also strongly supports will now get even faster disposition since Duterte cited it in his Sona, Senate President Vicente Sotto III told the BusinessMirror that “yes, starting Monday [July 30],” the health care measure will be on the Senate’s agenda.
Duterte had said defects in the healthcare system were “resulting in disparity in health outcomes between the rich and the poor in the urban areas and rural.”
The House bill’s main sponsor, party-list representative now Duterte’s spokesman Harry Roque, said the House bill grants every Filipino the right to health by virtue of citizenship.
In the Senate, Ejercito said, “We’re targeting passage of universal health care program in September, before the busy month of October, which is the filing of certificates of candidacy for next year’s election.”
Following the normal legislative route in the Senate, that means Ejercito’s committee should be reporting out the measure by early August, so it can be deliberated on and voted upon in plenary.
The House of Representatives had approved the bill on third and final reading in September 6 last year while the Senate version—arising from five separate bills—is still pending.
Sen. Joel Villanueva authored Senate Bill 60, or the Enhanced Universal Healthcare Act, together with Senators Ralph Recto and Sherwin Gatchalian. The measure seeks to expand the benefit packages being offered by PhilHealth by increasing the amount of benefits to lessen the out-of-pocket expenses on the part of the members, according to Villanueva.
Improving the benefit packages would entail the inclusion of preventive and promotive health services in a bid to alleviate the chances of confinement and encourage a healthy lifestyle among Filipinos.
Villanueva, in pushing his bill, had noted that as of 2016, at least 91 percent or 93 million Filipinos are covered by PhilHealth, but about half of them are indigents while the rest are composed of paying individuals from both formal and informal economies and lifetime members. “We want all Filipinos or 100 percent of the population to be covered by PhilHealth since we believe that every Filipino should not suffer any injustice in availing health services,” Villanueva said.
The Senate bill aims to qualify every Filipino for health insurance benefits regardless of whether or not he or she is a PhilHealth ID holder.
Villanueva crunched data from financial statements of PhilHealth in 2015 that showed it collected P96.7 billion from premium contributions of all its members, including the government subsidy for indigents. “Consequently, the PhilHealth paid out around P97 billion for benefit payments that covered about 8.4 million claims. If each claim would be treated as one patient, then it can be assumed that on average, each person who availed PhilHealth benefits in 2015 only got P11,500 each, a measly amount to cover annual medical expenses.”
The bill’s funding source indicates why pursuing the next-round sin taxes is crucial and must be frontloaded: under the bill, funds from the universal health care program will be sourced from: a) 80 percent of the incremental value collected from sin tax; b) 50 percent share of the national government from Pagcor income; and c) the charity fund from the PCSO.
Rice tarrification
Besides tax reform, the President pitched at his third Sona the urgent need for rice tariffication—that is, converting quantitative restrictions or caps on rice imports to imposing rice tariffs. This measure is universally seen as a key solution to resolving the problem of rice price spikes on account of supply shortages, a problem that in turn has been blamed for feeding the record inflation in May and June that breached targets. Together with the global oil price increases that the crafters of the TRAIN law admitted to having underestimated, the rice price hikes had been cited among those that caused blame to be heaped on the tax reform law.
The President had said in his Sona that “we need to switch from the current quota system in importing rice to a tariff system where rice can be imported more freely. This will give us additional resources for our farmers, reduce the price of rice by up to P7 per kilo, and lower inflation significantly.”
House Agriculture and Food Committee Chairman Jose Panganiban Jr. said House Bill 7735, or the “Revised Agricultural Tariffication Act,” is up for plenary debates in the House of Representatives soon. This will amend Republic Act 8178.
In the Senate, Agriculture Committee chairman Sen. Cynthia Villar had, in the last hearing on the measure in May, said she would rather take her time and completely thresh out all issues on the rice tarrification than risk a haphazard bill that would later create problems for the Philippine farm sector. She said she wanted to protect Filipino farmers.
Villar’s indicative timeline of end-2018 for finishing her committee work on the rice tarrification could be problematic, however, because the Philippines risks being subject of a complaint in the World Trade Organization (WTO) if it does not effect the conversion from QR to rice tariffs by the third quarter.
The National Economic and Development Authority (Neda) echoed President Duterte’s call on Congress to pass the bill to “tariffy” the country’s quantitative restriction on rice. In a statement on Tuesday, Socioeconomic Planning Secretary Ernesto M. Pernia agreed that the passage of the bill will reduce rice prices and make the agriculture sector more competitive in the long run.
The Philippines’ rice waiver, which expired last year, needs to be replaced by a rice tariff for all rice imports. This is part of the country’s commitments when it acceded to the WTO in the 1990s.
“There is no time to waste. All of us must rally behind the administration’s reform agenda, most especially the rice tariffication bill, which if implemented will make our agriculture sector competitive in the long term,” Pernia said.
Two bills are pending in the Senate on the shift from QR to tariffs: SB 1476 amending the Agricultural Tariffication Act, authored by Sens. Ralph Recto and Leila de Lima; and SB 1689, by Sen. Risa Hontiveros.
In Neda’s preliminary estimate, headline inflation rate would be reduced by one percentage point if the domestic wholesale rice market reduces its price to the level of imported rice.
Pernia also welcomed the President’s stern warning against “rice hoarders, cartels and their protectors” who can create the impression of an artificial rice shortage. He said these culprits manipulate the prices of rice to their advantage and to the detriment of the Filipino people.
Land Use Act
Yet another measure cited in the 2018 Sona that was also listed on the March 23 common legislative agenda of the Senate-House is the long-pending bill for a National Land Use Act (Nalua).
On Tuesday, Pernia had welcomed the President’s inclusion of Nalua as priority. It had been languishing in Congress for 20 years.
Pernia said Nalua aims to protect prime agricultural lands, to provide rationalized land use planning in the country, to consolidate national laws on land uses, and to address long-standing land use conflicts.
“We all share the President’s desire to protect the present and future generations. With the passage of Nalua, we ensure the sustainable use of the country’s land and physical resources,” Pernia said.
“We need to do this now,” Duterte had said, as the Nalua will “put in place a national land use policy that will address our competing land requirements for food, housing, businesses and environmental conservation.”
HB 5240, or “An Act Instituting a National Land Use and Management Policy, Providing the Implementing Mechanisms and Appropriating Funds Therefor,” was approved by the House on May 2, 2017.
Until press time, it remained unclear how the Senate environment committee would proceed on the Nalua, for which four separate bills were filed in 2016 and 2017.
There are obstacles to land use implementation, said former environment undersecretary Elmer Mercado, and one of them is the conflict between mines and the ancestral domain of indigenous peoples. Conflicting laws also pose a problem.
End ‘Endo’ and contractualization
One of Duterte’s most commented on moments in the Sona was his admission that redressing the situation of workers in order to finally end the scourge of “Endo” was not entirely in his hands, despite his May 1, 2018, executive order proscribing Endo. A lawyer, Duterte realized that it would require congressional action to enact a law that satisfies both labor and employers.
He asked Congress “to pass legislation to end the practice of contractualization once and for all.”
While the Sona pronouncement may be construed as a marching order for Congress to enact a law to end the odious practice of “Endo,” the slang for “end of contract” (the practice of hiring and terminating workers in five months to avoid the employers’ burden of regularizing them), labor groups sounded skeptical a day after Edsa. One group said a new order “without an attached written certification” must be taken with a grain of salt.
House Bill 6908 had been approved on third reading since January 2018. The Senate bill (SB 1826) principally shepherded by Villanueva was reported out by his Labor committee in March and awaits plenary approval.
Replying to the BusinessMirror about the Senate timeline for passage of the Security of Tenure bill and how he would push it, Villanueva said action on the measure must be “Asap” now that the President himself had explicitly put it on top of the priority agenda.
Labor groups feel the President must certify as urgent Senate Bill 1826, to hasten its passage before October, the deadline for filing certificates of candidacy for the May 2019 elections.
Villanueva told the BusinessMirror he is confident his security of tenure bill addresses both the concerns of both employers and workers.
Right after hearing the Sona, Villanueva said he agreed “with the President that while the Department of Labor and Employment had some successes in regularizing some workers, there are issues that can only be addressed through tax reforms.”
Villanueva had released in end-May the committee report on Senate Bill 1826, or the “Security of Tenure and End of Endo Act of 2018.”
Once passed into law, the measure, Villanueva explained, would remove ambiguities in the Labor Code, which is the source of circumventions, and: (a) prohibit labor-only contracting, and provide penalties for violation, (b) limit job contracting to licensed and specialized services, (c) classify workers into regular and probationary employees—and treat project and seasonal employees as regular employees, (d) provide security of tenure, (e) clarify standards on probationary employment, and (f) provide a “Transition Support Program” for employees while they are not at work or transitioning in between jobs.
In wrapping up his report in May, Villanueva said that in the process of producing the measure, “we learned the conflicting and contrasting interests of the different stakeholders. But we also learned that these interests converge. We all want economic growth, we want increase in productivity and we want better quality of life and we want certainty both in doing business and in employment.”
Hopefully, he can indeed produce a bill that guarantees workers’ rights without disrupting business unduly, as employer groups had fretted in interviews with the BusinessMirror on Tuesday that the President’s Sona pitch might be taken as a blanket order against even those forms of contracting that are allowed by law.
“We believe that what we are proposing is consistent to these principles agreed upon by all stakeholders. Ending ‘endo’ is not anti-business. Guaranteeing the right to security of tenure gives our workers certainty and social protection. It makes them more efficient and more productive, which is the primary concern of every business. Being pro-worker and pro-industry at the same time is not an impossibility,” the senator stressed.
The Senate measure kept the absolute prohibition on labor-only contracting, which happens “when a job contractor merely recruits and supplies workers to a contractee or the workers supplied by the job contractor are performing activities which are directly related to the core business of the said contractee or are under the control and supervision of the contractee.”
Villanueva said that in cases of labor-only contracting, the job contractor shall be considered merely an agent, and the contractee shall be responsible to the workers as if the workers were directly employed by the contractee.
Further, in all cases where labor-only contracting is present, the workers shall be regularized by the contractee, retroactive to the date they were first deployed to the said contractee, without prejudice to any criminal, civil, or administrative case against the labor-only contractor and the contractee.
The measure further provides for the licensing and regulation of contractors for specialized work, job or services, and imposes penalties for violations including the cancellation of license and administrative penalty for the responsible DOLE officer who licensed a noncompliant contractor.
Coconut farmers fund, EODB, open pit mining
The President’s Sona had also endorsed the creation of the Coconut Farmers and Industry Trust Fund, something that Neda’s Pernia hailed the day after.
Three bills on the subject that were filed in the Senate—by Sens. Bam Aquino, Risa Hontiveros, Francis Pangilinan, Ralph Recto and Cynthia Villar—have been consolidated and the resulting measure was pending at the Conference Committee level as of late March 2018.
HB 5745 is the House version of the coconut farmers’ trust fund. Currently, both chambers have approved their versions but with reservations, and this prompted Duterte to openly urge them in the Sona to create a bicameral conference committee promptly and reconcile both bills.
Meanwhile, the Senate environment committee has yet to wrap up work on three bills meant to prohibit open pit mining, outlaw black sand mining, and rationalize the sharing of mining revenue, the latter of which was filed by Recto, former ways and means committee chief.
Improving telco services
The President also cited one of his pet peeves in the Sona: the state of telecommunications service in the country. Despite having prodded all relevant agencies to move quickly to encourage a third telco player seen to end the duopoly in the industry, Duterte still flagged the issue, apparently in a bid to ensure the policy trajectory is sustained.
In the Senate, two related bills remain pending after both hurdling second-reading approval: the Open Access in Data Transmission Act and the Public Telecommunications Policy Act.
The mention of the recently enacted Ease of Doing Business Law or the Ease of Doing Business and Efficient Government Service Delivery Act (Republic Act 11032) was a welcome input, Pernia said, agreeing with the President that it will enhance market competitiveness in the Philippines.
Not all legislators were applauding at the Sona, meanwhile. Akbayan party-list Rep. Tom Villarin said “again his promises to end contractualization, give the coco levy trust fund to farmers, and other basic sector issues are good sound bites but lack political will. He totally skirted the state of our economy, inflation, unemployment and rising debts.”
The President’s determination to pursue the controversial war on drugs—still focused on law enforcement primarily—while refusing to treat drug abuse as a health problem as well, was also scored by critics. Lawmakers in the minority in both chambers of Congress were dismayed that Duterte simply glossed over all the issues raised against the bloody manner—with body count estimates ranging from 3,000 to 20,000—in which his administration has fought illegal drugs.
In the Senate, 19 drug-related pieces of legislation are pending, an indication of how seriously lawmakers regard the issue. As to how they will handle the drug-related bills, given the plateful of economic measures already on the agenda, bears watching in days to come. Meanwhile, it’s back to work for everyone, even in the troubled House, where the leadership change that marred the Sona continued to play out till midweek. And no one’s taking the time to breathe.
With reports by Cai Ordinario, Jasper Arcalas, Samuel Medenilla, and interns Mark Joseph Fernandez and Joahna Lei Casilao
Image credits: AP/Aaron Favila, Nonoy Lacza, Nonie Reyes