Tax reform bill dead in the water—Angara

The tax-cut measure pending in the Congress is dead in the water, for all intents and purposes.

The House of Representatives has surrendered to President Aquino’s decision to reject the tax reform, sealing its fate because under the under the Constitution, all tax measures should emanate from the House.

Sen. Sonny Angara, chairman of the Senate ways and means committee, said that although he was still committed to have the bill passed in the Senate, his hands were now tied because of the constitutional provision that tax measures should come from the House.

Speaker Feliciano Belmonte, who earlier vowed not give up until the bill was enacted in the current Congress, now says there’s no use

discussing the bill on the floor unless the President “is 100 percent for it.”

The President delivered the death blow when, speak­ing to reporters in Kuala Lumpur where he attended the Association of Southeast Asian Nations (Asean) sum­mit last week, he said he was not changing his opposition to the bill since it was just be­ing used by politicians to look good to the voters.

Before that, there were efforts by legislators and like-minded leaders of the business community to con­vince Mr. Aquino and his eco­nomic team, led by Finance Secretary Cesar Purisima, that the estimated P30-bil­lion losses to be incurred as a result of the income-and corporate-tax cuts constitut­ed only 2 percent of the BIR total tax collections, which reached P1.3 trillion in 2014. The tax-cuts proponents in Congress also proposed other ways of raising revenues, the last of which was a new mea­sure that would impose an excise tax of P10 for each liter of soft drinks, not to mention the lifting of the bank secre­cy law, which could enhance the collection of taxes by dis­couraging tax frauds.

But Mr. Aquino re­mained unconvinced.

Angara said he disagreed with the President that the bill was being pushed by pro­ponents to make them earn political brownie points. The goal of the tax-cuts measures, he said, was to address the pleas of wage earners who effectively pay the same tax percentage as presidents or CEOs of big companies.

Stalled at the House committee on ways and means is work on the con­solidation of 13 bills on tax reform. The panel’s technical working group came up with a proposal to exempt individ­uals earning below P180, 000 annually from paying income tax and impose a 30-percent income tax on individuals earning more than P1.1 mil­lion a year.

The consolidated bill also seeks to bring down cor­porate income tax from 32 percent to 25 percent, and adjust to inflation income-tax brackets.

The tax schedule in the country has not changed since 1997, when the Tax Re­form Law was passed.

Angara said the Senate was ready to submit the com­mittee report but under the Constitution, the chamber can’t release the committee report unless the House has passed its own version of the bill.

Angara said he was not giving up on the chances of the measure being passed in the current 16th Congress but acknowledged “the win­dow is shrinking as the days go by.” He added that Con­gress can actually pass the bill but “at the end of the day, he (the President) still has the veto.”

But the House minority bloc said that while Mr. Aqui­no has the veto power, Con­gress has the power to over­ride a presidential veto.

House Minority Leader Martin Romualdez of Leyte said Belmonte should have not acceded to Mr. Aqui­no’s rejection of the mea­sure “since Congress rep­resents the people and not Malacañang.” Romualdez, president of the Philippine Constitution Association (Philconsa), said Article VI, Section 27 of the Consti­tution, states that a vote of two-thirds of the members of both houses of the legislature can override a presidential veto.

Angara, nonetheless, said he would continue to pursue the tax-reform measure in the next Congress.

”I will just respect the de­cision of the Executive sector but we don’t agree with it and that’s why we will continue to fight for it,” Angara said.

Angara said that al­though the government was expected to lose at least P30 billion each year under the proposed tax cut, at least P3 billion would return to the government through in­creased public consumption.

”The government has been underspending the budget by P200 billion after the third quarter. So even if you deduct P30 billion from P200 billion in unspent pub­lic funds, it will hardly be felt by the government,” he said.

The Senate is tackling the proposed 2016 national budget and had given priority to the Salary Standardization Law (SLL) 2015 and Bang­samoro Basic Law (BBL) before it takes a Christmas break on Dec. 19.

The lawmakers will have another break from Feb. 6 to May 22 to give way for the election campaign of the May national elections.

The campaign period for candidates for president, vice-president, senator and party-list groups will start on Feb. 9 next year while candi­dates for congressional seats and other local positions will begin campaigning on March 25.

Angara said that while Congress does have the pow­er to override a presidential veto, it will not be practical because of the short period now available for Congress.

Angara added that in­cluded in the tax reforms that he was pursuing was the simplification of tax filing and payment for micro, small, and medium enterprises (MS­MEs) in line with the Asia-Pa­cific Economic Cooperation (Apec) member-economies’ call for more intensive efforts to help small businesses pen­etrate the global market.

“If the Apec attendees and delegates have special lane or treatment, the same should also be enjoyed by small entrepreneurs,” Angara, said.

”How we can make the Philippines MSME-friendly should be one of the priori­ties of the government after Apec as we all aim for inclu­sive growth.”

In the recently concluded 2015 Apec summit in Manila, the 21 economic leaders un­derscored the significance of the participation of MSMEs in global commerce to in­clusive growth and that the member-economies “will take action to facilitate such participation.”

Among the strategies that will help empower the MSMEs, which represent 98 percent of all registered busi­nesses, include trade facilita­tion, e-commerce, financing, and institutional support.

Angara, however, cited a new World Bank study titled, “Paying Taxes 2016,” ranked the Philippines 126th, down a notch from last year, and showed “the Philippines nei­ther improved nor regressed in the time (193 hours) and number of payments (36) it takes for a medium-sized firm to comply with tax obli­gations.”

“Business tycoons who own multi-billion corpora­tions have the same require­ments as sari-sari store own­ers and sidewalk vendors who may not be computer literate and who can’t afford to hire accountants. This should not be the case. We should make it easy for small players to form a business and pay taxes. We should streamline the process, lessen the steps and requirements, and ease the formalities that cause red tape,” said Angara, who has also been pushing for a more progressive and equitable in­come-tax rates in the country.

The lawmaker stressed that even Jack Ma, Aliba­ba billionaire founder and China’s second richest man, when asked by US President Barack Obama during the Apec summit how both the government and larger companies could help the small en­trepreneurs, said, “Govern­ment is simple. Just reduce the tax, or no tax for these guys.”

Angara said that while the government was al­ready giving tax incentives to small businesses as mandated by Republic Act 9178 or the Barangay Mi­cro Business Enterprises (BMBE) Act of 2002, many small entrepreneurs still do not avail themselves of these incentives due to lack of awareness and because they find the registration process and requirements too cumbersome.

Under the BMBE law, a barangay micro-enterprise with a total asset of P3 mil­lion or less will be entitled to an exemption from tax of the income arising from the operation of the enter­prise, and exemption from or reduced rates of local taxes, fees and charges.