The Senate is now working on the 2021 budget bill, deliberating on proposed changes to the version earlier approved by the House of Representatives. Towards the end of this month, lawmakers from both the Senate and the House are expected to meet and finalize all revisions to the bill, before approving it before the Christmas break.
Along with the budget bill, senators are also expected to finalize their version of the proposed Corporate Recovery and Tax Incentives for Enterprises Act (CREATE). The proposed law aims to reduce the corporate tax to 25% from 30% in 2021, and further down to 20% by 2027. CREATE will also overhaul the system for the grant of fiscal incentives or tax perks for investors and businesses.
So, on the one hand, senators are deciding on a bill that will significantly increase the national budget to P4.5 trillion, as it also provides an appropriation for the purchase of COVID-19 vaccines, in 2021. On the other hand, they are also deliberating a proposed law that may actually cut government revenues for 2021 onwards by reducing corporate taxes. Like the budget bill, the CREATE bill is expected to get through before the Christmas break.
Incidentally, there are a number of bills pending at the Senate regarding the creation of new economic zones. In particular, these are bills that will put up new industrial sites in Leyte and Bulacan (for the proposed international airport). As these bills have “fiscal incentives” components, perhaps the Senate will choose to make these bills consistent with the proposed CREATE Act.
The Senate leadership also hopes to get a few other urgent bills out to the plenary for approval by December. In a way, for both the House and the Senate, we may already be looking at the penultimate legislative agenda. The year 2021 will be the last full calendar year for the present Congress, which closes just before presidential and legislative elections in May 2022. There are only 20 months left for the 18th Congress.
For the Senate, these urgent measures include the proposed Financial Institutions Strategic Transfer (FIST) Act, which will pave the way for banks to sell non-performing assets to asset management companies that will rehabilitate these bad assets and perhaps sell them for profit in future. The bill aims to keep the banking system strong.
Over at the House, Majority Leader Martin G. Romualdez said lawmakers would hasten the approval of 12 economic measures sought by the Department of Finance (DoF) to help the government “jumpstart the economy.” Of these bills, five are undergoing interpellation or debates, while seven are being discussed at various committees.
These bills propose, among others, to make government banks assist or lend more to small businesses; modernize the fire protection service and the armed forces; overhaul the military and police pension system; and promote the development of the coconut industry through the creation of the Coconut Farmers Trust Fund.
But there are three tax bills and two government reorganization bills that are worth watching. And then, there is the proposed National Land Use Act. These six bills at the House, in my opinion, have very significant implications, given their potential impact on the present and future economy.
The tax bills are the proposed Digital Transactions Value-Added Tax Act; HB 6135, which proposes a new fiscal or tax regime for the Mining Industry; and, the proposed Internet Transactions Act as an amendment to the current E-Commerce Law. And then, there are the two bills that proposes the creation of the Department of Water Resources and the Water Regulatory Commission, as well as the National Disease Prevention and Management Authority. And, as mentioned, there is also the proposed National Land Use Act.
According to Mr. Romualdez, he has no doubt that the House “will be able to pass all these measures before the onset of election fever next year .” And here lies my concern, really. While expediting the approval of these measures may be welcome, I just hope the House — and later the Senate — will not hasten approval just to meet a deadline. Haste can make waste.
Given these bills’ potential implications on the economy and the way we do business in the country, I hope these will be given ample time and study prior to consideration. In this line, all those in these sectors should already start preparing to either support or oppose these bills, for reasons and consideration based primarily on science, economics, and data.
The worst that can happen is that politics will be the bigger consideration, or perhaps the elections themselves. And that the work, rather than being in aid of legislation, becomes in aid of re-election. Note that of the six bills, three are tax-related or will impose new taxes. Of course, nobody but nobody will want to be known as supporting new tax laws just prior to an election.
Two bills in particular, the proposed Digital Transactions Value-Added Tax and the proposed Internet Transactions Act can have broad impact particularly more on consumers rather than producers or sellers. VAT is a consumption tax. While many online purchases to date are still free from VAT, this may no longer be the case by 2022 — an election year. New taxes on the mining industry may be limited in scope, and impact mainly miners.
As for the National Land Use bill, it remains uncertain whether this will also have tax or revenue implications. Changes in land classification can impact real property values and taxes as well as zonal valuations. Or, the implication may be on the supply of land available for conversion and commercial and industrial development; or on zoning restrictions that may require certain industries to relocate.
And, last but not least are the government reorganization bills, particularly on the creation of the National Disease Prevention and Management Authority. This, of course, becomes doubly significant in light of what we are experiencing with the present pandemic and how government resources were squandered by PhilHealth. The reality now is that such a thing — pandemic and corruption — can happen again.
As for the Department of Water and the proposed Water Regulatory Commission, I can only hope that due consideration be given the concerns of various stakeholders. One cannot overemphasize the importance of water resources to the country, its people, and the economy. There is an obviously urgent need to ensure supply security while at the same time improving people’s access to clean, safe drinking water.
With everything that is happening around us, Congress must work truly in aid of legislation, to benefit the people, rather than in aid of re-election in the next 20 months.
Marvin Tort is a former managing editor of BusinessWorld, and a former chairman of the Philippines Press Council