Marcos says pushing for tax reform amid pandemic 'very bad timing'

MANILA, Philippines – Senators rejected passing the pending tax reform bills immediately, even as Acting Socioeconomic Planning Secretary Karl Chua said it could fund the government's pandemic response.

In a statement on Thursday, April 23, Senator Imee Marcos, the Senate economic panel chair, said that pushing for tax reform now is "very bad timing."

"Pursuing tax reform now is very bad timing because practically all economic activities have been affected by shutdowns. Tax reform is incompatible with an economic stimulus period, when tax relief is in fact part of the solution," Marcos said.

There are two tax reform measures pending in the 18th Congress: the Corporate Income Tax and Incentive Rationalization Act (Citira) bill and the Passive Income and Financial Intermediary Taxation Act (Pifita) bill.

Both measures have been described as revenue-neutral, meaning they would not bring cash to government coffers. (READ: EXPLAINER: Why the government is pushing for 2nd TRAIN package)

Congress is set to resume on May 4 and among the measures to be priotized is the economic stimulus package.

Why the talk on tax reform? At a Laging Handa briefing on Wednesday, April 22, Chua reacted to the Philippine Chamber of Commerce and Industry's call to defer the passage of Citira to entice foreign investors.

When he was a finance undersecretary, Chua was the architect of the tax reform measures pushed by the government.

Chua said on Wednesday that PCCI's proposal will be studied by the Department of Finance after the coronavirus crisis. The National Economic Development Authority will provide inputs, he said.

Chua added: "Ako ay naniniwala na ituloy dapat ang comprehensive tax reform, pero siguro ay may konting dagdag or pagbabago para matulungan iyong mga naapektuhan ng COVID-19."

(I believe that we should continue pushing for the comprehensive tax reform, but perhaps, there should be amendments to help those who were affected by COVID-19.)

Chua noted that not passing tax reform would result to more borrowings, as requirements for emergency aid to Filipinos ballooned. Citira and Pifita, however, are not expected to bring revenues to the government as these seek to rationalize the tax system.

"Ang utang kasi, hindi po ito libre na galing sa langit. Ang ibig sabihin lang ng utang, hindi po natin babayaran ngayon sa pamamagitan ng buwis. Ang ibig sabihin niyan, iyong anak at iyong mga apo natin ang pinapabayad natin nitong inutangan natin," Chua said.

(Debts do not come free from heaven. What borrowings mean, is that we could not pay for it now through the current tax system. It means that our children and grandchildren will have to pay our current debts.)

Think of other ways? Marcos on Thursday said that taxing during the pandemic will suffer because of the lockdowns imposed.

"Tax in the time of COVID 19 will expectedly suffer. Traditional sources of government revenues like taxes in any form, be it individual, corporate, customs duties, consumer sales, etc, will all be hit because the economy is in a virtual standstill," Marcos said.

She added that the government should really "explore debt relief," a proposal which Finance Secretary Carlos Dominguez III had earlier rejected.

Senator Sonny Angara, in a FOCAP forum, said he was "curious" as to why Chua is pushing for the tax measures when these are revenue-neutral.

"It's not revenue-raising unlike the first TRAIN package when you increase taxes on sugar bevarages, on petroleum products, on cars, and it produced more than a hundred billion in extra revenues," Angara said.

Angara said that the government should instead "think of new things," which could include better tax collections from Philippine offshore gaming operations. POGOs and its service providers owe the Philippine government around P50 billion in unpaid tax liabilities. (READ: Reopen POGOs? 'High risk,' warns Senator Villanueva)

Senator Aquilino "Koko" Pimentel III, meanwhile, said the Citira bill should be revisited as it was "developed during the pre-coronavirus world."

"We have to take a look at how the world at large and the world economy, as well as our country's economy, have changed due to the COVID-19 pandemic," Pimentel said. – Rappler.com

Aika Rey

Aika Rey is a business reporter for Rappler. She covered the Senate of the Philippines before fully diving into numbers and companies. Got tips? Find her on Twitter at @reyaika or shoot her an email at aika.rey@rappler.com.

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