January 24, 2018, 3:26 am
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A trainload of vested interests

In passing the Tax Reform for Acceleration and Inclusion (TRAIN) bill in both Houses of Congress, the legislative branch, prompted by the Executive and clearly facilitated by other insidious considerations, seem to have just dumped a rather large and noxious load on the public. 

And what a load it is.

It is not enough that TRAIN as passed is a mixed concoction antithetical of the terms “Tax Reform, “Acceleration” and “Inclusion.” Substantially there is very little actual tax reform within its provisions. “Acceleration” is likewise nothing more than spin as is “Inclusion.”

These terms in the title of the bill do not accurately describe the more salient points of what is substantially nothing more than another piece of work by the Legislative branch. The same responsible for such scandals as the pork barrel scams, trumped up impeachment charges against the   Judiciary, as well as constantly serial kitschy telenovelas of corruption hearings to persecute political opponents. More so, going by the profound analysis of a credible non-partisan and eminently academic think tank, TRAIN is really just a disjointed and mixed concoction -- a witches’ brew comprised of snake oil and arsenic.

During the early months of the Duterte administration we held high hopes that proposals for tax reform would finally lead to accelerated gross domestic productivity growth (GDP) that would include sectors neglected by the GDP expansion we experienced in the last few years.

While indeed the statistics were admirable, what development we experienced did not essentially trickle down as most economic indices that mattered remained dismal. TRAIN was supposed to have addressed that.

It was also supposed to have addressed critical infrastructure development constantly bungled even where the economy was profuse with liquidity, so fattened that it could find room for pork barrel scandals that went as high as the Office of the President with unprecedented scams such as the novel albeit illegal Disbursement Acceleration Program (DAP). TRAIN was designed to also reverse the dismal trend in foreign direct investment flows (FDI) where our decrepit infrastructure from poor airport management, the lack of modern sea and air ports, the slowest telecommunications facilities, traffic and power capacities prevented the flow of FDI enjoyed by neighboring economies.

FDIs need infrastructure development. We practically had none given the irony of a highly liquid economy.

Allow us to set the foregoing expectations as the benchmark by which we might measure TRAIN, specifically taking to task our legislators on the very specific terms they had woven to describe TRAIN and make it palatable and attractive -- tax reform or the correction of past mistakes, GDP acceleration or productivity growth, and finally, the economic inclusion of long excluded sectors.

The Action for Economic Reforms (AER) is a non-partisan think-tank composed of academicians, economists, lawyers and other professionals who’ve built an excellent reputation for quantitative analysis and credibility, and who have established themselves not simply as policy watchdogs but as critical partners for progress. In their recent analysis of TRAIN they came out with some observations that address our own reform, acceleration and economic inclusion measures.

Allow us to cite verbatim some of their analysis and from each indulge us our critical reactions. In their analysis the AER pinpointed specific accountabilities and is especially alarmed at the provisions pushed by Senators Juan Edgardo Angara and Ralph Recto.

According to AER, “Sen. Recto introduced more holes to our VAT system with new exemptions on prescription drugs  and condominium fees instead of reducing revenue leakage. Instead of correcting an existing practice of granting zero-rating for sales and transactions in special economic zones and free port zones even to those which may not be direct exporters, we fear that Sen. Angara’s insertion on ecozones will create a black hole for revenue and reward more anti-poor, anti-indigenous people, APECO-like zones in the country.”

As it stands there are already quite a number who declare themselves in the export business simply to enjoy tax exemptions.

AER further noted that, “Sen. Angara continued to protect the interests of the aviation industry by maintaining a very small P0.33- one-time increase in the aviation fuel rate (in comparison to the other fuel products), and the rich self-employed professionals (SEPs) by giving them the option of an 8-percentincome tax rate even when they earn above the VAT threshold of P3 million. Sen. Recto similarly upheld the interests of the rich by lowering the rates of the automobile tax for and giving discounts to cars priced above P2 million.”

AER added that, “Sen. Recto’s move to double the rates of Documentary Stamp Taxes (DST)…  will undoubtedly affect economic transactions and the ease of doing business in the Philippines.”

This one especially disturbing as the DST issue was neither in the House nor the Senate versions of  TRAIN and was thus technically not subjected to full hearing debates and was purely a bicameral insertion.

AER likewise cited Sen. Manuel Villar for legislating a tax specifically benefiting his businesses. “Sen Villar’s interests have also been accommodated in the bicam report with the VAT exemption for socialized housing maintained for three years before finally implementing a P2-million threshold for projects inside Metro Manila.”

On the proposal to increase taxes on tobacco products that we’ve been strongly advocating and which Sen. Angara had totally left out of TRAIN, the AER wrote, “We are also very alarmed by the House’s insertion, led by Rep. (Romero) Quimbo, of a meager P2.50-increase on the tobacco tax rate per year until 2021 -- this provision was not present in either house or senate version. This rate is an aberration to our health objectives as it is a far cry from the P30-increase we have been pushing for to prevent 200,000 new smokers in 2018 (and succeeding years).”

All told, TRAIN has hardly any reform provisions. Much less productivity and economic inclusion save for a trainload of vested interests obviously intimately pandered if not nurtured and fattened.
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