‘Infra program at risk from stalled tax reform’

MANILA, Philippines - The envisioned golden age of infrastructure under the Duterte administration may end up becoming the “bronze age” even or  “dark age” if Congress does not pass the proposed tax reform bill, a Cabinet official said yesterday. 

Socioeconomic Planning Secretary Ernesto Pernia said the non-passage of the tax reform measure, which has been certified as urgent by President Duterte, could limit the government’s capability to roll out key infrastructure projects. 

“It’s not going to be the golden age of infrastructure. It will be the bronze age maybe of infrastructure, or maybe dark age of infrastructure. So that is how terrible, that is how unwelcome the non-passage of the CTRP (comprehensive tax reform program) is going to be,” Pernia said in a press conference in Malacañang.

There is no more time for the Senate to deliberate, much less, approve the Duterte administration’s first batch of tax reforms as Congress adjourns on Friday, Senate President Pro Tempore Ralph Recto said yesterday.

Recto’s comments came after President Duterte certified as urgent House Bill 5636 or the first package of the government’s tax reform measure, which seeks to reduce income taxes while also raising other levies including those for fuel and vehicles.

 He said under the Constitution, all tax measures must emanate from the House before the Senate deliberate on it.

“There’s nothing yet in the Senate to speak of,” Recto told The STAR, adding it was unlikely that the chamber or the Senate ways and means committee, chaired by Sen. Sonny Angara, will hold hearings during the break.

The House was expected to approve the measure on third and final reading last night in response to Duterte’s certification.

The government is planning to spend more than P8 trillion for various infrastructure projects to usher in what it called the “golden age of infrastructure.” It has also vowed to undertake massive spending on human capital and social protection for the most vulnerable sectors to address poverty and reduce inequality. 

To finance these projects, the Duterte administration is pushing for a comprehensive tax reform package that involves sizable cuts in personal income tax rates, expansion of the value added tax (VAT) base, and adjustments of excise taxes on oil, automobiles and other products. 

Economic managers are hopeful that Congress will pass the measure before it goes on a break this week. 

The Department of Finance has warned that without the tax reform measure, the government would have to raise deficit spending by three percent of the gross domestic product, a move that it said could lead to an “unstable fiscal position.” Such move could also result in a credit rating downgrade that would cost the government an extra P30 billion in annual debt servicing and P100 billion more in higher borrowing costs.

 According to the National Economic and Development Authority, the country’s real gross domestic product (GDP) level will be higher by between 0.6 percent and 1.1 percent by 2022 if the tax reform measure is in place. Without the bill, which is formally called Tax Reform Acceleration and Inclusion (TRAIN), the GDP level will be lower by 0.5 percent and 1.1 percent by 2022. The GDP is the sum total of all goods and services produced in an economy. 

Some lawmakers are opposed to a number of provisions in the executive department’s proposal including the lifting of VAT exemptions enjoyed by cooperatives. 

The version of the House of Representatives is expected to generate P82 billion in additional revenue, lower by almost half than the P164 billion projected revenue gains from the Finance department’s proposal. 

Pernia is hopeful that Congress will pass the executive department’s version in its entirety. 

 “They should realize that we in the economic team, our interest is really just the country’s development, the improvement of society. We have no personal agenda at all. And we are trained to do economic analysis, tax analysis, as we know what is best, what is optimal,” he said.  

DOF spokesperson Paola Alvarez admitted that the final version of their proposal could be watered down because of concerns raised by some lawmakers.  

“Until now we’re still encouraging our members if they can still consider the original provisions but of course that’s up to the legislators. We’re still trying to convince them to retain some of those provisions,” Alvarez said.  

To make up for the foregone revenue, the government is planning to improve tax collection efforts and intensify efforts against leakages, she said. – With Poalo Romero