The Market Monitor Minding the Nation's Business
By Luis Leoncio
After all the hopes raised on the tax-cuts bill in Congress, it looks like President Aquino is determined to maintain the status quo on the tax system, after all. But sponsors of the measure are unfazed and are saying they will fight on.
Just last week, Mr. Aquino held out some hope when—after initially indicating he was against the tax-reduction initiative—said he would “consider” the measure after consultations with Finance Secretary Cesar Purisima and Internal Revenue Commissioner Kim Henares.
This was after he met with Senate President Franklin Drilon and Speaker Feliciano Belmonte Jr. on the issue. In the most recent development on the case, the President, during a forum with the Foreign Correspondents Association of the Philippines (Focap), said he’d rather have no changes in the tax schedule under his administration.
“When I campaigned—perhaps I can answer the question with a question—did we not promise we will not raise taxes? And we didn’t raise taxes, except for the sin taxes, would you agree?” Mr. Aquino replied to a question about his sentiments on the tax-cut bill.
He reiterated that a sudden reduction in revenues might have an effect on the country’s current investment-grade status, which “further lowered the interest rates we were being charged because now we are considered less risky that we previously were.”
The President said the credit-rating agencies looked at the whole gamut of “how we govern, of how we manage public debt, and of managing the deficit of the budget” before they gave the investment grade status.
“If there is a reduction in revenue, there has to be compensation elsewhere. For instance, some of the proposals were for a reduction in income tax, then a compensatory act would be the increase in VAT (value added tax),” he said. And he noted that while people’s incomes may rise with the tax-cut bill, the tradeoff would have the same individuals paying more taxes through the VAT.
“The end point is that when you remove something, you add something, then there’s a balance. But when you remove something and you don’t add something, there is an imbalance,” Aquino said. “I have to remind everybody we are still operating under a budget deficit: you remove the revenues, you increase the deficit.”
Despite the President’s statement, Sen. Sonny Angara, Senate ways and means committee chairman and sponsor of the tax-relief bill in the chamber, said the fight will continue. Congress has until February to pass the measure, he said.