By Jovee Marie N. Dela Cruz, Butch Fernandez & Bernadette D. Nicolas
BORDERING on the cavalier, President Rodrigo Duterte will address, physically inside the hallowed halls of Congress, Filipinos half of whom have become despondent with the coronavirus disease 2019 and the extreme measures his government took to curb its spread. Duterte will stand, in a manner of speaking, between the portal of the past and future; the unfinished business and the hazy way forward.
And as he leads the reopening of the second regular session of the 18th Congress, lawmakers (mainly) and government officials would aim to find their bearings anew to help the country’s economic rebound from the crippling effects of the Covid-19 pandemic, while continuing the “unfinished business” set out in the time of “normalcy;” a time that appears to have felt like yesterday.
Nonetheless, the going would be easy for the Duterte administration as all lawmakers concede the need to respond to the impact of Covid-19 and the measures against its spread is urgent.
Both the majority and the minority in the Senate, for one, agree such response will largely shape the direction of the second regular session of the 18th Senate when the chamber reconvenes on July 27.
This is because many of the carryover bills from 2019, which senators had vowed to continue working on in 2020, have been overshadowed by the massive, mind-boggling challenges of dealing with the pandemic, described around the world as the worst crisis to hit humanity since the 1929 depression.
Prostrate state
IN fact, even the 2020 budget had to be drastically altered via the Bayanihan To Heal As One Act.
That law, Republic Act 11469, was passed in a special session in late March, to give the President flexibility to realign billions in agency budgets for the huge requirements of the moment: urgent purchases of personal protective equipment; providing outright doles to millions of households whose livelihood was disrupted by the virus-induced lockdowns; and, beefing up capacities of public hospitals and building quarantine facilities, among others.
As a result, much of the “unfinished business” from the Senate before it adjourned sine die on June 5 will not just involve passing a slew of stimulus and recovery measures including the Bayanihan to Recover As One Act (or Bayanihan 2), but the pandemic is reshaping the context in which even the remainder of the Comprehensive Tax Reform Program (CTRP) is being viewed.
For instance, the senators who are sometimes accused by economic managers and congressmen of taking their sweet time passing the second tax reform the Trabaho bill that evolved into the Citira (Corporate Income Tax and Incentives Reform Act) and now, Create (the Corporate Recovery and Tax Incentives for Enterprises Act) have committed to urgently pass their version of the bill by August, at least.
But it’s just the first part of the bill the reduction in corporate income tax (CIT) that is seen to draw unanimous support. The contentious other half the rationalization of tax incentives is still expected to spark debates, notwithstanding claims by the House that its revised version of Citira, or Create, considers the near-prostrate state of many businesses, especially export-oriented firms in economic zones.
Opting easy
HOUSE Committee on Ways and Means Chairman Joey Sarte Salceda said his committee in the Lower House is preparing for “likely” bicameral conference committee proceedings on tax reforms that will be crucial to economic recovery reforms, and which are pending in the Senate.
“As I said before, the committee is prepared to accept the Senate version of the CREATE, but if there are provisions that will erode revenue too much, or are contrary to the committee’s basic principles on tax equity, efficiency and effectiveness, then we are also prepared to fight for a more sustainable version,” Salceda said. “I prefer the easier path, of course.”
He added that the committee is also preparing for bicam proceedings on the Pifita (Passive Income and Financial Intermediaries Taxation) Act and the Real Property Valuation and Assessment Reform Act (Rpvara), or Package 3 of tax reform.
‘We’re prepared’
SALCEDA reiterated he prefers “the easier, faster route of no bicam.”
“So I hope the Senate passes a version that accepts our basic principles,” he added. “But, if not, we are prepared to have a bicam on these.”
Meanwhile, as chairman of the House economic stimulus and recovery cluster, Salceda said given that the stimulus bills have also tax provisions, “we are also prepared to go into bicam on these bills.”
The solon said the committee will also explore ways to provide small-business regulatory relief.
“We will study and hear from stakeholders if there are charges that we can waive for small businesses, or regulations that we can relax so they can stay afloat,” he added.
Salceda said he, especially, wants small businesses to be able to register with the appropriate agencies for free, with some sort of tax holiday of maybe two years, “so that they can benefit from stimulus programs, and, when they recover, pay their fair share of taxes.”
“We will study what would be most helpful to small businesses,” he added.
Economic recovery
DUBBED by the Department of Finance (DOF) as the “largest fiscal stimulus program for enterprises in the country’s history,” the CREATE bill, if passed, will trigger an immediate cut in the CIT rate from the current 30 percent—the highest in the region—to 25 percent this year.
This would be followed by a 1-percentage point reduction starting 2023 until it reaches 20 percent by 2027. As a result, the government is expecting to give up at least P667 billion in revenues from this reduction.
The DOF also said the CREATE bill, if enacted into law, will benefit non-large taxpayers as there will be an extension of the applicability of the net operating loss carryover for losses incurred this year from the current three years to five years.
Finance Assistant Secretary and Spokesman Antonio Joselito Lambino II said they are still hoping that all the remaining tax reform packages, including CREATE, will be passed by the end of the year to help the economy bounce back from the slump caused by the pandemic.
“The immediate 5-percent reduction in CIT will help small businesses by leaving more money in their hands so that they can retain jobs and pay for expenses. The ability to offer fiscal and non-fiscal incentives will allow us to attract the most desirable investments in terms of job creation and technology,” Lambino told the BusinessMirror. “These benefits have been shared with our legislators.”
Reform packages
LAMBINO explained that “Package 3 will help LGUs [local government units] in their resource mobilization and Package 4 will broaden investment and insurance opportunities.
“These will also help our economy recover from the pandemic,” he added.
With the government’s vow on tax reform, Lambino said credit rating agencies continue to laud the Philippines and affirm its invest-grade ratings, which they consider as a “vote of confidence” in a sea of downgrades and negative outlook revisions worldwide.
“The credit rating agencies continue to cite our positive track record in debt management and our commitment to tax reform as key factors in their favorable assessments of our credit-worthiness. The Duterte administration intends to maintain its approach to debt management; and we hope Congress will pass the remaining tax reform packages that will further improve the fairness, simplicity, and equity of our tax system,” he said.
While the country has been receiving multiple affirmations of its investment grade credit ratings, Lambino said it would still be hard to predict what the future holds for the country’s credit ratings as the forthcoming upgrades would depend on several factors, including how long the pandemic will last and how long a vaccine becomes available. The economic team is eyeing to achieve an A rating before mid-2022.
“In the meantime, the Duterte administration’s economic team is committed to exercising prudent and responsible management of the country’s resources,” he said.
Tax cuts
SENATE Majority Leader Juan Miguel Zubiri said in June, as the senators began their break, that the chamber “gives its word” that when sessions resume in July, the Bayanihan 2 and the CREATE bill will get priority attention. But he was explicit in his support only for the CIT reduction.
“The Senate of the Philippines expresses its full support for the passage of the enhanced and repackaged Create [bill], previously known as the Citira. In the midst of the Covid-19 pandemic, economies the world over are on the brink of collapse, with businesses needing massive government support in order to rebuild, recover and retain jobs for their employees.”
According to Zubiri, the amendments in the CREATE bill “address this need head-on; offering businesses an unprecedented and outright 5-percent tax cut, thereby reducing the CIT rate from 30 to 25 percent.”
“This reduced CIT rate will allow businesses to recoup the unanticipated losses they incurred during the various stages of community quarantine across the nation,” Zubiri added.
The passage of the CREATE bill, he said, “will be particularly vital to MSMEs [micro, small, and medium enterprises], which make up 99 percent of the nation’s corporate taxpayers and employ a majority of Filipino workers.” The MSMEs were particularly hit hard by the lockdowns that began in mid-March.
Other cogs
IN a hint that beyond the CIT cut, there may yet be much debate between the two chambers, especially on the incentives, Zubiri said: “While we see the merits of the measure, we are also committed to ensuring that the best version of the bill should pass the Senate—one that is truly responsive to the extraordinary needs of our time,” he said.
Rest assured, Zubiri said, “that your legislators are working tirelessly in scrutinizing the measure in its finer points in order to craft and approve the most effective economic recovery plan possible.
“You also have our word that we will take up the bill upon resumption of the session in July and work to pass it by the month of August.”
So, too, will the other cogs in the CTRP wheel the Pifita and the Rpvara. Both measures are up for bicameral conference committee deliberations.
Top priority
HOUSE Speaker Alan Peter Cayetano said the lower chamber will prioritize the immediate passage of the proposed Bayanihan 2 and other fiscal measures when the Second Regular Session of the 18th Congress opens on July 27.
Cayetano said Bayanihan 2 and other fiscal measures are needed to ensure that MSMEs and banks are given assistance and opportunities to bounce back from the financial losses caused by government’s grappling with the Covid-19 pandemic.
Aside from Bayanihan 2, these measures include the Financial Institutions Strategic (FIST) bill and the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (Guide) bill.
“In the coming days, we will be working and coordinating closely with various national government agencies in preparation for [the President’s] fifth Sona [State of the Nation Address] and the beginning of the second regular session,” Cayetano said.
Cayetano said the House is holding consultations with different sectors and groups to ensure that its legislative agenda are aligned with the needs of the people and the vision of the President.
Before the Congress sine die adjournment in June, the House had approved the following: House Bill (HB) 6815 or the P1.3-trillion Accelerated Recovery and Investments Stimulus for the Economy (Arise) bill; HB 6817, or the Anti-Covid-19 Discrimination bill; HB 6864, or the Better Normal for the Workplace, Communities, and Public Spaces bill; and, HB 6920, or the P1.5 trillion Covid-19 Unemployment Reduction Economic Stimulus (Cures) bill.
All these bills are now pending before the Senate.
How-to hoped for
THE Senate minority, meanwhile, expects Duterte to unwrap the administration’s comprehensive economic recovery plan when he delivers his fifth Sona before a joint session of Congress on Monday.
“At the top of our [Sona] wish list is to hear the President’s plan on how to revive our economy heavily hit by the pandemic and help millions of our countrymen, including hundreds of thousands of overseas Filipino workers, who lost their livelihood,” Senate Minority Leader Franklin M. Drilon said in a radio interview last Tuesday.
Drilon suggested that the upcoming Sona is an “opportunity for the President to present an overall plan on how the country will survive the pandemic.”
Drilon disclosed that at the top of the opposition’s SONA wish list is to hear straight from Duterte his administration’s plan “on how to revive our economy.”
At the same time, Drilon deplored the administration’s “lack of an overall comprehensive plan in the fight against Covid-19” lamenting that because the government did not have an overall plan, “it resulted in a shotgun approach in dealing with the pandemic and in implementing the longest lockdowns in the world, which did little to prevent the spread of the virus but only damaged the economy.”
Expect cooperation
THE opposition senator asserted that “we want to hear the government’s plans on how we can get out of this situation as a whole; and I assure them that the members of the opposition will cooperate with the administration in crafting measures to help them address the pandemic.”
At the same time, Drilon conveyed a wish to “hear President Duterte talk about how much the country would really need to beef up the economy,” even as he noted “conflicting figures between the Department of Finance and Congress.”
Drilon recalled that members of the House of Representatives were reported to be eyeing a P1- trillion stimulus package to revive the economy but Malacañan and the DOF found the amount too high as the government can only allow up to P140 billion. That figure is the price tag the Senate put on its own version of Bayanihan 2, which hurdled second reading before its June break.
Proposed bills
FOR Salceda, the eye is on the revenue ball.
Salceda said his committee is now working on the passage of several bills providing government with much-needed revenue to support the economy now sputtering with the lockdown-easing measures.
He said his “committee is prepared to do whatever it takes, on the tax side, to get us back to positive territory.”
According to Salceda, their proposals “will yield about P591 billion in five years; more than enough to cover the period’s incremental debt payments due to our Covid-19 response and new programs to boost the economy.”
These measures include the proposed motor vehicle road users’ tax, the tax on compensation and tax on revenues of Philippine Offshore Gaming Operators (Pogos), tax administration reforms and the proposed digital taxation.
“First, we will optimize existing revenue sources; that means, as much as possible, we will try to improve or update existing taxes, or enhance tax administration,” Salceda said. “That is why my digital economy taxation bill only closes tax loopholes for the tech giants instead of creating new taxes and why my proposed taxes on Pogos clarifies confusion in taxing those companies.”
Essential services
THE lawmaker added the committee’s proposal on motor vehicle road users’ taxes “also just updates the rates, which has not been done since 2004, even if it was mandatory to do so under the law.”
Salceda added: “On entirely new taxes, except for purposes of health or some other much greater good, I am skeptical of consumption taxes, especially at a time when you need to boost consumption.”
He said he “will also not entertain taxes that will affect the poorest of the poor, so barter trade taxes will not even be discussed.”
He said other reforms that would bolster the government’s revenue include: the implementation of oversight into customs-bonded warehouses; full digitalization of the taxpayer filing and payment in the Bureau of Internal Revenue (BIR); and, application of zero tax for some period and tax base expansion after for MSMEs.
“I will also continue to exercise active oversight on the BIR and the Bureau of Customs (BoC),” Salceda said. “First, I hope to see to it that they complete basic digitalization–that means, most essential services that most taxpayers deal with should be possible to do remotely.”
Over, above
SALCEDA added he will be rolling out “a legal review of the impediments to digitalization in the coming session.”
Likewise, he said his committee will study the call on luxury taxes.
“We just have to study which luxuries in particular will be worth the effort, since luxuries consumption is also depressed during economic crises. They are very progressive taxes, and if we can find luxury goods worth taxing, I prefer luxury taxes over broad consumption taxes,” he said.
“We favor luxury taxes, but we need very strong tax administration measures to ensure that we are able to collect them. Otherwise, we will just widen the tax gap,” Salceda explained. “For example, we have to figure out whether it is better to impose them on imports or at the point of sale. Proper entry, reporting, valuation and assessment will be just as important in this case as collection.”
Protecting consumers
FOR his part, House Committee on Trade and Industry Chairman Weslie Gatchalian said the global pandemic saw the unprecedented rise of e-Commerce in the country.
“Unfortunately, during this period, we are also seeing an increase in the number of scammers who are seeking to take advantage of the latest technological development,” Gatchalian said. “Thus, the Committee saw the need to introduce regulations to this largely unregulated market to ensure that online consumers and merchants are protected, industry best practices are adopted and cross-border disputes [are] resolved.”
The lawmaker said the panel is now ready to present the substitute bill to HB 6122 or the Internet Transaction Act for the plenary approval of all the members.
In relation to consumer protection, he said the committee has also approved the creation of a technical working group to work on the amendments to the 28-year-old Consumer Act.
“The amendments seek to bridge the gap between the law and the advances that have happened since it was passed in 1992,” he said.
Lacking sufficiency
LIKEWISE, Gatchalian said the committee is also considering the amendments to the Price Act, which, as seen when the pandemic struck the country, is insufficient because thousands of Filipinos fall victim to unconscionable price increases that are not subjected to any price ceiling.
He said the three bills being prioritized by the Committee are fully supported by the Department of Trade and Industry.
“Once passed, these bills hope to create a more inclusive economy for every Filipino,” he said.
According to Gatchalian, other bills that have been referred to the trade and industry panel and now under study are amendments to the Cheaper Medicines Act and the Intellectual Property Code.
Engaging Cha-cha
SENATORS, led by Senate President Vicente Sotto III, are also expected to pick up key reforms that were part of their unfinished business, and which they believe would pull the rug from under resurgent moves in the House, supposedly fueled by a “clamor” from local executives, to amend the Constitution.
The amendments to the Public Service Act (PSA), where Sotto is a key mover, and the retail liberalization amendments, are of this mold.
Drilon said on Sunday that the avowed need for Charter change, which is to make the Charter more investment-friendly, will be mooted by the passage of the amended PSA. Drilon, a former secretary of justice, also reminded House advocates for Charter change that their other avowed basis for Cha-cha, i.e., to “institutionalize” the Mandanas ruling, is not necessary since SC rulings are deemed part of the law of the land already.
Meanwhile, the pandemic has also given some lawmakers cause to push their pet bills.
Two measures pending in late 2019, the Department of Disaster Resilience and the Department of Overseas Filipinos were recently cited as becoming more relevant in light of the pandemic-induced problems.
For instance, the latter bill is seen needed in times like the pandemic, when nearly half a million Filipino workers were displaced from their jobs, sending various government agencies scrambling to repatriate them. At press time, the Department of Foreign Affairs (DFA) reported the number of those repatriated is nearing 100,000.
Image credits: Simeon Celi Jr./Malacanang Presidential Photographers Division via AP, Arman Baylon/Malacanang Presidential Photographers Division via AP