The Finance department could ask President Rodrigo Duterte to exercise his veto powers if Congress approves a watered-down version of the proposed Tax Reform for Acceleration and Inclusion (TRAIN) law.
“That (a veto) is an option,” Finance Secretary Carlos Dominguez 3rd told reporters when asked about the department’s plans if potential net revenues from the final TRAIN Act – likely to be passed by Congress before the year ends – end up well below expectations.
Section 27 of the 1987 Constitution allows the President of the Philippines to reject bills passed by Congress, sending these back to the appropriate chamber for reconsideration. Congress can override the veto via a two-thirds vote.
The TRAIN bill — the first package of the government’s Comprehensive Tax Reform Program (CTRP) — has already been passed by the House of Representatives. The Senate is currently considering its own version of the bill, which is being held up by differences over proposed tax hikes.
Dominguez said the potential net revenue from TRAIN should be P137 billion just for the first year of implementation.
“[Below that], it is going to be very difficult. You have to remember that we have additional expenses,” he said.
The Finance chief said that for instance, the new law mandating free tuition at state-owned universities will require P50 billion in funding for the first year, about P60 billion for the second year, P70 billion for the third year, and 75 billion or P80 billion for the fourth year.
“Where are we going to get the money?,” he asked.
Dominguez has repeatedly stressed the need to approve proposed tax reforms given the government’s ambitious “Build Build Build” infrastructure program.
He said the CTRP would serve as a fiscal buffer that would enable the government to pursue an expansionary economic policy.
“It is important, to be sure, that the tax reform program be passed as soon as possible. Tax reform will give us the fiscal space to pursue the expansionary measures. Without the additional revenues the reform package will bring, we cannot fully pursue the infrastructure program,” he said.
The Finance chief has also said that failure to pass the TRAIN bill would be very bad for the government’s infrastructure program, which would have to be drastically reduced.
Seventy-flagship projects have been identified and 18 have already been approved by the National Economic and Development Authority Board.
“When the shovels hit the ground, expect an economic growth spurt,” Dominguez has claimed.
Besides ensuring the fiscal space needed for spending on infrastructure and social services, the Finance chief has also said that the government would need funding to deal constraints such as the rehabilitation of Marawi City—likely cost P30 billion.
“I assure you we will not compromise on fiscal discipline and court runaway debts to please populist demands,” Dominguez said.