Nomura cites Duterte’s political clout to see tax reforms through Congress

By Charmaine A. Tadalan
Reporter

PRESIDENT Rodrigo R. Duterte has enough political capital to push his remaining tax reforms through Congress, according to an analyst of Asia-headquartered financial service giant Nomura who noted that the latest Social Weather Station (SWS) survey bared significant broad-based improvement in Mr. Duterte’s public satisfaction that again peaked since he took office in mid-2016.

“As we argued in our 2019 year-ahead report, his popularity is key to watch in the run-up to the midterm elections on 13 May. An improvement in his popularity has been sustained, and we think it could boost his support base in Congress,” according to a Global Markets Research note released on Thursday by Nomura International (Hong Kong) Ltd that was authored by Euben Paracuelles, Nomura’s senior economist for Southeast Asia.

“This implies a rising likelihood of his allies retaining a strong majority in Congress, which, in turn, should support the fiscal reform agenda during the second half his six-year term.”

The 17^th Congress — now on a Feb. 9-May 19 break surrounding the May 13 mid-term legislative and local elections — will have only May 20-June 7 to approve any remaining reforms on its plate. Any unfinished bill after that period will have to start from scratch in the 18^th Congress that opens its first regular session on July 22.

Mr. Paracuelles cited results of the SWS’s First Quarter 2019 Social Weather Survey, released also on Thursday, showing Mr. Duterte’s net satisfaction rating — computed as percent of respondents satisfied minus percent dissatisfied — remaining “very good” at +66, six points more than the +60 he garnered in the preceding quarter and 10 points more than the year-ago +56. Mr. Duterte’s latest rating matches the overall result in 2017’s second quarter, with both survey rounds’ +66 being the best mark in more than six years or since the +67 posted in the August 2012 survey.

The First Quarter 2019 Social Weather Survey — conducted on March 28-31 via face-to-face interviews with 1,440 adults aged at least 18 years old nationwide — had sampling error margins of ±2.6 points for national percentages.

“The SWS survey showed the improvement in popularity was broad-based, rising across major geographic areas and across income classes,” according to Mr. Paracuelles.

“We think an important driver to this is declining inflation, which we expect to continue despite some risks,” he added, referring to headline inflation which has eased for five straight months to a 15-month-low 3.3% in March from a nine-year-high 6.7% in September and October last year.

Sought for comment on Nomura’s assessment, a spokesman of the Malacañan Palace remained cautious. “Hindi ka rin maka-siguro d’yan kasi (You cannot be assured on tax reforms because) it depends on them (lawmakers). (It’s their) Discretion naman sa kanila ‘yun eh. They may have a different view on the matter,” Presidential Spokesperson Salvador S. Panelo said in an interview on Thursday. “Ultimately, Congress will have to decide kasi sila naman ang magi-initiate n’yan, di ba (because tax measures start in Congress, right)?”

Only two of up to five tax reform packages — designed to help finance a stepped-up P8-trillion infrastructure drive under Mr. Duterte, who ends his six-year term in mid-2022 — have so far been enacted.

The first, Republic Act No. (RA) 10963, slashed personal income tax rates but raised or added levies on several goods and removed a number of value added tax exemptions when it took effect in January last year.

That first package was heavily watered down as it went through both the House of Representatives and the Senate, even after Mr. Duterte had talked to lawmakers and made a veiled threat in a State of the Nation Address about withdrawing support for the candidacy of one Senate leader come elections.

Also enacted was RA 11213, which provides a general tax amnesty, even as it was also watered down by removing a provision easing bank secrecy restrictions that would have enabled tax authorities to check the veracity of applicants’ asset declarations.

Tax reforms awaiting legislation include those proposing to reduce the corporate income tax rate and remove redundant tax incentives, simplify the tax structure of the financial sector, centralize real property valuation and assessment, as well as increase government share in mining revenues and excise taxes imposed on alcohol and tobacco products.

While all these bills had secured third and final reading approval at the House, Senate President Vicente C. Sotto III said on March 20 that he was “doubtful at this point” that his chamber could approve any more tax reforms.