Palace-backed tax bills may face rough sailing in Senate

By Butch Fernandez @butchfBM

APPROVAL of the tax propos- als forwarded by President Ferdinand R. Marcos Jr. will not be a “slam dunk” in the Senate—and may even be blocked—if they will cause misery to already overtaxed people, Senator Francis

G. Escudero warned last Thursday.

And if the administration team that will be selling the tax proposals

“is the same crew that did a poor job in explaining the Maharlika Investment Fund,” then the revenue measures may be doomed, the senator pointed out.

Escudero added that “at this time, selling taxes to Filipinos is like asking an Eskimo to buy a freezer.”

He declared that “one, we have become an e-Commerce Republic. So expect a massive pushback when you start taxing any good added on the cart,” the senator from Bicol said, referring to a Palace-backed bill that will slap taxes on online purchases.

Escudero further identified the plan to raise motor vehicle registration fees “as one that will also face roadblocks as car owners are already taxed twice daily at the pump when gas has a VAT [value-added tax] on top of the excise tax.”

And then there’s the toll fee, “the price motorists pay for government’s failure to fix public roads,” he added.

Fiscal space

THE measures Marcos requested from Congress include the following: tax on single-use plastics; VAT on digital services; tax in the mining fiscal regime; and, updating the Motor Vehicle Road User’s Tax (MVRUT). The President also seeks the passage of the bill for an Ease of Paying Taxes (EOPT) Act. Marcos also requested Congress to enact a reform of the military and uniformed personnel pension system to ensure its sustainability.

Last Wednesday, Rep. Jose Ma. Clemente S. Salceda said the House Committee on Ways and Means “is done with the MVRUT.” (See “Salceda targets early approval of tax bills,” in the BusinessMirror 27 July 2023. pp. A1 or https://businessmirror.com.ph/2023/07/27/ salceda-targets-early-approvalof-tax-bills/)

“All the others are approved on third reading, except mining, which will be taken up in the coming days,” Salceda said.

The lawmaker added they expect the EOPT bill to be approved by the Senate next month.

Salceda said these reforms “are crucial” to ensuring that Marcos “has the fiscal space he needs to make his vision happen.”

The lawmaker explained that a strong tax system—exemplified by tax efforts or tax-to-GDP—is the foundation of a strong state capable of delivering public goods and services.

“So, we want to enact all these tax reforms because, while revenue has been growing, the economy is growing much faster,” Salceda said.

“So we are seeing warning signs of declining tax effort.”

The lawmaker added that as of the first semester, the government is looking at a tax effort of 12.8 percent.

“Last year it was 14.6 percent. So, we need to catch up,” he added. “It’s possibly a sign that the economy is moving towards things we are currently not taxing or are undertaxing.”

Salceda cited as example the MVUT rates, which he said has not been updated since 2004—“not to mention our excise tax exemptions on pick-up trucks”—while car sales are up 28.1 percent.

Good messaging

HOWEVER, Escudero cautioned that in pushing these measures in the time of “high prices and low wages,” the Marcos administration will be “putting its huge political capital on the line.”

What would help, he said, is good messaging that will win over citizens that while these proposals are painful, they are needed.

Kaya dapat ang ipapadalang mga taong magbebenta ng isang mahirap lunukin na produkto ay ’yung hindi mahina sa pagpapaliwanag,” the senator stressed. [The people the Palace would send here should be those who are good at selling a product that is hard to swallow.]

Escudero, however, assured that “as courtesy to the President, he would listen to the proposals and study the merits, “because in the Senate, every idea must be given its day.”