President Rodrigo Roa Duterte updates the nation on the government's efforts in addressing the coronavirus disease (COVID-19) at the Malago Clubhouse in Malacañang on March 30, 2020.
Presidential Photo/King Rodriguez
Supplemental budget not an option sans new revenue sources —NEDA
Ian Nicolas Cigaral ( - May 15, 2020 - 11:29am

MANILA, Philippines — The Duterte administration chose to operate within the bounds of the P4.1-trillion national budget in fighting the coronavirus disease-2019 (COVID-19) pandemic, opting not to propose a supplemental outlay due to the lack of new revenue source.

Acting Socioeconomic Planning Secretary Karl Kendrick Chua defended the government’s decision not to ask Congress for additional funding, a measure no less than the Bangko Sentral ng Pilipinas (BSP) was calling for to avert a bigger economic collapse due to the coronavirus pandemic.

“The Constitution says that requires revenue source. (I’m) not sure where we can raise tax now,” Chua told on Thursday evening.

“We can’t have a supplemental budget if (there is) no new source of revenue,” he stressed.

Instead, the government would make do with the P4.1 trillion allocated to it by Congress this year, adding just P130-P160 billion in fresh funds, P50 billion of which will form as capital of Land Bank of the Philippines and Development Bank of the Philippines to extend loans to firms. Another P20 billion will go to the Philippine Guaranty Corp., while the balance will finance wage subsidies and jobs from June to December. 

The entire proposal is contained under the Bayanihan II Act submitted to legislators last week.

Congress is also being asked to pass the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, essentially an amended version of the Corporate Income Tax and Incentives Rationalization Act (CITIRA) that got stuck in the Senate before the pandemic hit.

Under CREATE, the corporate income tax rate is reduced instantly to 25% from the current 30%, an accelerated scenario from the government’s original proposal of a 2% cut every year, as it looks to incentivize businesses to spend more for recovery.

The two bills— Bayanihan II and CREATE— are expected to work in tandem to put the economy in a recovery path supposing the pandemic gets under control on the second half of the year. Chua is confident the two measures will be passed as the Executive department and Congress “share the urgent need for the country to recover."

Cool reception

But at this early, Senate President Tito Sotto he is not sure whether there is still a need for Bayanihan II, when the current Republic Act No. 10964, enacted in March 23 and expiring June 23, can simply be extended.

“All the powers needed by the President to touch 2019 and 2020 budget are all in the Bayanihan 1 Act,” he said in a separate text message.

At the Lower House, legislators were also wary of the need for CREATE to alter tax incentives at this businesses are going under. “CITIRA seeks to attract new foreign investors by lowering corporate income taxes and rationalizing fiscal incentives. This is a medium-run concern,” said Marikina Rep. Stella Luz Quimbo, pertaining to CREATE’s old version.

Quimbo authored a bigger P370-billion economic stimulus bill, which she said will be tackled by the House of Representatives next week. Finance Secretary Carlos Dominguez III said he was not aware of the bill’s contents.

“Let’s take care of existing businesses and help them deal with their liquidity concerns and face new threats as well as opportunities in a post-COVID-19 world,” Quimbo said.

Some analysts and business leaders were also careful on assessing government plans, but nonetheless was looking for more action. 

“It’s like front-loading all the reforms, which is very good…However, what we were hoping for were details to Pillar 4, but unfortunately weren’t there yet,” said Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, in an online exchange.

John Forbes, senior advisor at American Chamber of Commerce and Industry, welcomed CREATE, but said that at 25% CIT rate as planned, the Philippines’ business levies “will still be above” Indonesia’s 22%. “Nobody knows for sure what will work,” he said in a text message.

“We look forward to learning more about structural reform proposals which also boost the economy,” he added.

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