SUBTLE just isn’t in the vocabulary of the Duterte administration when it comes to pushing for economic reforms that must be approved by Congress, particularly the tax reform agenda that calls for lower income and corporate taxes but higher and additional excise taxes on transport and petroleum products.
If we go by the avowed statements of the Department of Finance, every local and foreign business chamber in the country and almost every nation friendly to the Philippines, particularly to the economic managers, “support” the tax reform package now sitting in Congress.
Yes, almost everyone, except the lawmakers themselves who must sign, seal and deliver it to Malacañang for that coveted presidential signature that will turn the measure into law.
Four months since it was delivered to Congress in September, the draft bill hasn’t been given the big-deal treatment and attention it supposedly deserves–from the point of view of the administration’s economic team–for the greater good and benefit of the nation.
In fact, the draft bill has gotten the ire of the emerging opposition in both chambers of Congress. In sum, the senators and congressmen see the provisions on excise taxes on fuel as ill-timed and likely to elicit higher incidence of poverty despite its proponents’ argument that the poor will be shielded from such ill-effects via cash transfers and other forms of government subsidy.
The context for a better perspective on the situation is this: oil was trading at around $45 per barrel in global markets around the time the draft bill was submitted to Congress. Since then, members of the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC exporters of the commodity have agreed to cap their production levels to normalize prices. Now, benchmark Brent crude is trading at $55.45 a barrel.
Raising the excise tax on gasoline and placing a tax of P6 per liter on diesel–which currently has a zero rate–would of course hit hard logistics and transportation. The result would be catastrophic in terms of the cost of public transportation and basic commodities due to the higher cost of deliveries.
We know where the opposition is coming from. But where is the aggressiveness on the part of the economic managers coming from?
“Rising business activities in the country have worsened the traffic situation and caused severe traffic congestion, more so in urban areas. Over the past years, the Philippines has been spending more and more on infrastructure to improve mobility, consistent with the aim of sustaining a robust economic growth,” according to the latest, “ECONOMYPH, A Snapshot of the Philippines’ Economic Path,” a publication of the National Economic and Development Authority.
The bottom line is of course more money to spend on development. That is why it follows that the bottom line of the tax reform agenda is raising more revenue from the taxpayers, in spite of the seemingly pleasing show card that says lower income and corporate taxes attached to the reform package.
“From an amount equivalent to 1.8 percent of gross domestic product (GDP) in 2010, the allocation for infrastructure in the national budget has continually risen to hit 4.3 percent of GDP in 2015. The Duterte administration aims to further ramp up spending on infrastructure over the next six years, looking at spending as much as 7.1 percent of GDP by 2022,” according to ECONOMYPH.
The conflict between the Executive and the Legislative is inevitable and has come to the fore. To paraphrase the 17th-century Dutch philosopher Baruch Spinoza: No matter how thin you slice it there are always two sides to a conflict.
Before the showdown erupts, both sides must allow the wisdom of cooler heads to prevail. The administration needs the money to finance its ambitious economic development programs, but the lawmakers are saying this is not an auspicious time to raise taxes on transport and petroleum products.
The heart of the matter is socio-economic development, which both sides are advocating for a better tomorrow. With that common ground established, there is no compelling reason for the Executive and the Legislative not to seek a compromise for the greater good. After all, compromise is still the rule of thumb in life and in politics, especially when the greater good of the nation and people is at stake.