Drama over tax reform

Time is running out on the administration’s key tax reform measure. It has to be passed over the next few weeks and signed into law with enough time to implement it by next year.

Passage of the tax reform measure is also important if the much ballyhooed Build Build Build infrastructure program is to get off the ground. The Duterte administration is banking on tax revenues to fund the infrastructure program instead of a partnership with the private sector.

The finance secretary is feeling the pressure. It wasn’t an empty warning he issued about recommending the veto of the tax reform bill if it is watered down too much.

A presidential veto of the much awaited tax reform measure has dire consequences on the economy… and on the re-election of Senator Sonny Angara, chairman of the Senate ways and means committee. Indeed, the President gave a gentle reminder to Sen. Angara during the SONA. Put the Dominguez veto warning in that context and the message is clear.

Senator Sonny must be really worried that he is in a no win situation. If he lets the tax reform measure through as the DOF wants it, voters may punish him the way Senator Ralph Recto was punished when the Batangas senator sponsored the VAT Law. If he waters down the tax increases, the administration may drop him in their 2019 senatorial slate.

The problem of Sen Sonny is that the Senate is not like the House where the congressmen are like a flock of sheep being herded by the Speaker and the majority floor leader. Senators believe they are all shepherds. The ways and means chairman is only there to harmonize their views.

Poor Senator Sonny has very little political wiggle room in this contentious reform measure. Faced with the impossibility of satisfying everybody, Senator Sonny should probably simply do what he thinks is right. It’s still a year and half before the next election anyway, and who knows how the political wind will be blowing by then.

But the senator must consider the immediate consequences of a presidential veto if the tax measure delivers a lot less than Sec. Dominguez wants. First of all, the so called Dutertenomics will be turned upside down. There won’t be enough money for the P9 trillion Duterte flagship infrastructure program.

The economic managers are depending on tax revenues from the tax reform measure to finance the projects. Even if some projects will be financed by ODA from Japan and China, they have already dumped PPP as a potential source of funding.

If they now have to restructure the Build Build Build program in the light of fiscal constraints, the roll out of projects will be even more greatly delayed. Then again, the Cabinet members in charge of infra, the secretaries of public works and transportation, will now have an excuse for slow execution of projects.

A veto of a watered down tax reform measure will have serious consequences on how our economy will be perceived. Economic analysts and the business sector in general have conditioned their positive reviews on the tax measure being passed and quickly implemented.

Tax reform is supposed to fire up the administration’s economic program. Without it, there could be some problems on the fiscal side that may even lead to a downgrade of our investment grade credit rating. If that happens, even the private sector will be affected as their borrowing costs will go up.

Our economic managers will not be too happy if they have to swallow their pride and go back and ask the private sector to fund those infrastructure projects because the General Appropriations Act (GAA) can’t do it. Who knows… DOTr may have to rebundle the airport projects Sec. Tugade unbundled.

A vetoed tax reform measure may make an exchange rate projection of P55 to $1 seem too optimistic. A general loss of confidence on how the economy is being managed is likely.

The BSP may be forced to roll out some tough measures to protect not just the peso, but also the economy. Many of those are not palatable to the business sector because regulations we thought we would never see again would be back.

All things considered, Sen. Sonny may have to put aside the consequences of higher taxes on his re-election to prevent a bigger calamity. Helping pass the tax reform measure is the only way the young senator can escape being potentially blamed for any serious downturn in the economy caused by some other factors.

Sen. Sonny should go through the motions of hearing everyone voice their concerns. But in the end, the Senate has no choice but to deliver the reform package as close to the one drafted by the DOF.

There is no guarantee passing the tax reform package will stop the peso from falling or getting more foreign investors to come. But it seems to be the only logical thing to do in the light of fragilities in our economic and political environment.

Next time, the chairmanship of the ways and means committee should go to a senator who is not up for re-election.

Tough assignment

Enough of the serious stuff… speaking of tough assignments, I caught this joke in one of my e-groups.

All the members of the company’s board of directors were called into the chairman’s office, one after another, until only Ted, the junior member, was left sitting outside.

Finally it was his turn to be summoned. Ted entered the office to find the chairman and the other four directors seated at the far end of the boardroom table. Ted was instructed to stand at the other end of the table, which he did.

The chairman looked Ted squarely in the eye, and with a stern voice, he asked, “Have you ever had sex with my secretary, Miss Monroe?”

“Oh, no, sir, positively not!” Ted replied.

“Are you absolutely sure?” asked the chairman.

“Honest, I’ve never been close enough to even touch her!”

“You’d swear to that?”

“Yes, I swear I’ve never had sex with Miss Monroe, anytime, anywhere,” insisted Ted.

“Good. Then you fire her.”

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco