PHL taxpayers are paying more, but Congress must act on reforms

Taxpayers are “actually offering to pay more taxes” which fund the conditional cash transfer program and other inclusive growth measures high on the agenda of the ongoing annual meeting of the Asian Development Bank in Manila, a Malacañang official noted Wednesday.

 

But while the tax-paying public are willing to shoulder their share of the burden of funding government through a 15 to 20 percent increase in voluntary tax compliance, the sin taxes and rationalized fiscal incentives bill from Congress  “has not yet come to us…” Presidential Communications and Strategic Planning Secretary Ricky Carandang said Wednesday. 

 

Congress has not spelled out “a specific date [when they] would have passed these measures,” Carandang told reporters at a briefing on the sidelines of ADB’s 45th Board of Governors’ annual meeting.

 

The Senate and the House of Representatives “know how important this is… they know how important the social spending programs are,” the Palace official said.

 

“The credit rating upgrade will take into account the speed at which these bills are passed by Congress,” Carandang noted, referring to one of critical conditions credit rating agencies and multilateral lenders are seeking from the Philippines–higher revenues to sustain spending and thus finance inclusive growth.

 

Narrow tax base

 

In an interview with GMA News Online, International Monetary Fund deputy managing director Naoyuki Shinohara said the government’s fiscal position is an indicator of how effective good governance is.

 

Shinohara said he “knows a little bit of how the system works here” having lived here for three years more than 10 years ago.

 

“The size of the revenue here in this country in proportion to the GDP is very low… If you look at social sector programs and measures to promote inclusiveness, poverty reduction, this country is still relatively low in responding to this situation,” Shinohara said.

 

“The tax base is very narrow in this country. This is exactly why the government is to broaden the tax base, to strengthen the tax administration,” he noted.

Latest data from the Bureau of Internal Revenue show that only a little over 2 million people pay income taxes and that much of the tax burden–more than 90 percent–is borne by residents of Metro Manila.

 

Shinohara said the adequate ratio of revenues to gross domestic product “ is up to the choice of the people whether you want big government or want small government… ultimately it is the choice of the people.”

 

Pending tax reforms

 

Carandang said the excise tax bill could generate P50 to 60 billion in additional revenues for government.

 

Budget Secretary Florencio Abad has said P33 billion of the sin tax proceeds “we can use for social services for the poor, particularly universal healthcare for the second quintile of poor households.”

 

Abad had hoped the sin tax bill will be passed by June, but pressure on Congress eased when the Department of Trade and Industry noted recently that its international trade negotiators were able to get the United States and Europe to give the Philippines until March 8 next year.

 

Trade Secretary Gregory Domingo said the Philippine mission to the WTO was able to negotiate for a grace period or reasonable period of time to remove the higher set of excise taxes on imported alcoholic beverages.

 

“The Philippines negotiated in good faith and considered various factors before agreeing to the reasonable period of time to comply with the ruling.  We have also assured the distilled spirits industry of our support as they adjust to the ruling," Domingo said.

 

"This benefits the Philippines as it also gives our legislators ample time to work out certain policies consistent with our obligations in the WTO,” Trade Undersecretary Adrian Cristobal said.

 

Stalled in committees

 

Congress is in recess and will resume session on May 7.

 

Under the 1987 Constitution, all tax laws of the country must first come from the House of Representatives.

 

The Aquino administration-backed version of the sin tax reform bill is HB 5727 authored by Cavite Rep. Joseph Emilio Abaya. However before Abaya’s bill was filed, the committee had worked on other sin tax bills and issued a subcommittee report.

 

Cagayan de Oro Rep. Rufus Rodriguez asserted that the subcommittee report should be discussed first before Abaya’s HB 5727.

 

Over at the Senate there has been little or no movement since Aug. 8, 2011 on the fiscal incentives reform bill numbered HB 4935.

 

There are three counterpart Senate Bills: SB 2142 by Senator Ralph Recto, SB 2379 by Senator Manuel Villar and SB 2755 by Senator Edgardo Angara.

 

Recto chairs the Senate committee on ways and means, Villar leads the economic affairs and trade and commerce committees, Angara chairs the committees on education and science—a sector which stands to gain more funds from passage of the bill.

 

The delicate task of moving the administration’s sin tax bill out of the House at the soonest rests upon the shoulders of House ways and means committee chair  Rep. Isidro Ungab of the third district of Davao City. —With Victor Sollorano, GMA News