Conclusion
Repeated warnings of slower flow of investments and reduced competitiveness—should the Tax Incentive Monitoring and Transparency Act (Timta) and the Rationalization of Fiscal Incentives (RFI) bill hurdle Congress—bode ill for the Aquino administration, which has already endured a beating in its final leg after the Mamasapano tragedy in January.
So, realizing the possible backlash, especially the likely withdrawal of bu-siness-sector support for President
Aquino, leaders in Congress quickly gave the assurance that these two bills would be passed fairly and transparently.
“Actually, we discussed Timta and the RFI bill during our monthly meeting with our Senate counterparts on Monday,” House Committee on Ways and Means Chairman and Liberal Party Rep. Romero S. Quimbo of Marikina City said, noting that they took into account the concerns and fears of the private sector over the two proposed measures.
“With the [lower chamber] version of the Timta and the RFI bill, currently under deliberation in the House Committee on Ways and Means…they don’t have to worry,” Quimbo said, in reaction to a three-part special report of the BusinessMirror, titled “Timta, RFI could cost P-Noy business support.”
The monthly meeting was attended by Quimbo, Speaker Feliciano Belmonte Jr., House Majority Leader and Liberal Party (LP) Rep. Neptali M. Gonzales II of Mandaluyong City, Senate President Franklin M. Drilon and acting Senate Minority Leader Vicente Sotto III. Indeed, lawmakers need to assuage the fears of businessmen. For an administration that has proven to be too reluctant to spend public money to spur growth, a greatly reduced private-sector investment would certainly cause further economic slowdown.
The Asian Development Bank said that, when the pace of growth decelerated by almost 1 percentage point to 6.1 percent in 2014 from the average of the previous two years, the main culprit was the slowdown in government spending. In 2014 public expenditures only amounted to P1.982 trillion, or 13 percent below the programmed spending.
Timta
Still, Quimbo said the House of Representatives is set to pass the Timta before its sine die adjournment on June 11, while the RFI will hurdle committee deliberations in June and is targeted to be reported at the plenary before the President’s State of the Nation Address on July 27.
Quimbo has already said the Senate and the House have already deleted the provision in Timta mandating the creation of the Tax Expenditure Account in the annual General Appropriations Act.
They also removed the provisions that require investment-promotion agencies to appear before Congress and ask for budgetary tax subsidy. These are among the major concerns of business groups.
LP Rep. Maria Leonor Gerona-Robredo of Camarines Sur, author of Timta, or House Bill (HB) 2942, said the proposed measure should be passed as it promotes transparency, which the country needs.
HB 2942 seeks to promote transparency and accountability in the grant and administration of tax incentives to business entities, private individuals and corporations.
“There’s no provision in Timta that discourages investment; the proposed law only asks for a transparent system…nothing more, nothing less,” Robredo said. “Even businessmen want transparency besides good governance.”
Robredo also said the Timta is receiving many positive comments from the members of the lower chamber. She said the House Committee on Ways and Means will continuously discuss Timta with several stakeholders.
Liberal Party Rep. Jerry Trenas of Iloilo, Centrist Democratic Party Rep. Rufus Rodriguez of Cagayan de Oro and LP Rep. Antonio Rafael del Rosario of Davao del Norte, all members of the Committee on Ways and Means, also backed the passage of Timta.
“The grant of tax incentives to encourage investments and companies to do business in the Philippines has been a sound strategy that our economic managers have employed to bolster our economy, generate employment and to encourage growth in certain key industries,” Treñas said. “However, we must also take into account the present-day context of our economy and of the respective industries benefited by these incentives. There is a need to reassess the efficacy and cost-benefit ratio of these incentives to ensure that the objectives of these incentives are still met by our existing legal framework.”
Rodriguez, coauthor of Timta, meanwhile, said the incentives given by the government should be monitored with the passage of the measure.
Deputy Majority Leader and National Unity Party Rep. Magtanggol T. Gunigundo of Valenzuela, said “we need a law on transparency, like the Timta, for the Asean integration in December.”
“In the advent of Asean 2015 integration, we want our policies to be consistent and the implementation should have predictable outcomes. However, we should keep an open mind on the suggestions of taxpayers,” he said.
RFI
Meanwhile, Treñas said the lawmakers should carefully review the recommendation of several government agencies before passing the RFI bill.
“Fiscal incentives rationalization, however, must be done after careful review by the concerned government financial agencies and upon proper consultation with the affected industries. We must ensure that proposed legislation rationalizing incentives should not adversely affect our ongoing programs that encourage direct investments and the growth of local industries,” he said.
Gunigundo said any rationalization must be predicated on a tax system that is easy to comprehend and comply with.
Party-list Reps. Jonathan dela Cruz of Abakada and Rep. Sherwin Tugna of Cibac also supported the passage of the RFI bill. “I am for the enactment of the bill. It’s about time we rationalize our tax regime if we are to be globally competitive,” de la Cruz said.
Tugna said: “I may support to amend the current incentives to be reasonable, making them a win-win situation for both the government to get revenue from taxes. However, the bill should not dissuade foreign investors and make our country attractive to foreign investors.”
The RFI bill has been facing strong opposition due to its provisions, particularly on the lifting of the tax- and duty-free incentives of several industries.
“Definitely, we have to hear out these oppositions and study the bases and validity of their positions and arguments with the end in view of harmonizing them with the pending bills. [However] we cannot continue nurturing and spoiling certain industries forever. We should not create a culture of mendicancy where we favor industries, which do not even try to be competitive. The government cannot forever be a nanny to overgrown adults acting like kids,” Party-list Rep. Rodel Batocabe of Ako Bicol said.
Business groups also want assurance from the government that reforms are institutionalized.
“The challenge now for the Aquino administration, and this has been also said by the Management Association of the Philippines in the past, is to institutionalize reforms so the next administration can’t go backward. We need to get something in place and not keep reversing,” American Chamber of Commerce of the Philippines Director David “Ebb” Hincheliffe had said.
With just a year left before the present administration comes to a close, business groups—fearing investment instability because of the possible change in the incentives regime—may find consolation in the fact that time may only permit the passage of just one of two bills. A ranking official of the Department of Trade and Industry (DTI), who is privy to the matter, earlier said the RFI measure may have a better chance of being passed into law, as the DTI is more inclined to give way on it, compared to the Timta.
The DTI would hold greater control in the grant of incentives with the RFI compared to the Timta, which would give the Department of Finance the power to demand the reportorial requirement from enterprises and wield the power to suspend incentives. Ultimately, the decision to bargain competitiveness in attracting investments in exchange for higher revenue collection—and whether this would be a legacy of the Aquino administration—would depend on how firm the DTI can stand its ground in the months to come.
By Jovee Marie N. dela Cruz & Catherine N. Pillas