WITH the opening of the 18th Congress and the anticipated fourth State of the Nation Address (Sona) on Monday, President Rodrigo Duterte is expected to push anew for the passage of his priority bills, which are seen to accelerate his administration’s march to meet its goals for the remaining three years.
Members of the 18th Congress started filing their “pet” bills beginning the first day of July. Some of these bills are the priority measures that Duterte mentioned in his previous Sonas, hence, the tag “Sona bills.”
President Duterte delivers a speech at the special session of the International Conference on “The Futureof Asia,” May 31, 2019, in Tokyo.
To note, only five Sona bills were enacted into law under the 17th Congress.
The remaining tax packages under the Tax Reform for Acceleration and Inclusion (Train) law are also included in the so-called Sona bills.
Albay Rep. Joey Salceda and Camarines Sur Rep. Luis Raymund Villafuerte are among the early-birds who refiled the Sona bills. The two lawmakers have both filed bills separately amending the outdated provisions of the Public Service (PS) Act, the Foreign Investments Act (FIA) and the Retail Trade Liberalization (RTL) Act.
‘Opening act’
ACCORDING to Villafuerte, these measures aim to further open wide the economy to more foreign investments.
He added these bills would be among the measures the Executive branch would ask the 18th Congress to approve this year to fulfill the President’s goal of further revving up the economy, creating more jobs and significantly lowering poverty incidence by 2022.
Villafuerte said these amendments would serve as the “opening act” for Congress’ move to amend the 1987 Constitution. Such, ultimately, is expected to pave the way to federalism and the liberalization of foreign ownership restrictions that Villafuerte said have barred the Philippines from securing higher levels of foreign direct investments enjoyed by its neighbors.
Likewise, Presidential Spokesman Salvador S. Panelo told the BusinessMirror that aside from federalism, there are more things to look forward to in the next half of Duterte’s term, including the passage of these three priority measures.
Still, Panelo added that with the President’s unwavering support for federalism, Malacañang emphasized that this form of governance, as well as changing the Charter, can still happen within Duterte’s term.
Except for the amendatory bill on anti-terrorism to add teeth to the Human Security Act, the FIA and the PS Act are also high on Senate President Vicente Sotto III’s list.
Sotto has vowed to ensure that the Senate, under his leadership, will “continue to strive and focus on our legislative work.”
Greater foreign ownership
NO less than Speaker Gloria Macapagal-Arroyo had pushed for amending the 83-year-old PS law in the 17th Congress, with a salient provision for a clear definition of “utilities” in order to allow key sectors (i.e., telecommunications) to be freed from the “60-40” constitutional restrictions on foreign equity ownership. It was viewed by critics as a means to amend the Charter without going through the Charter-change process.
Interestingly, the Senate counterpart of Arroyo that time who also pitched for amendments to the PS law is one of her arch-political enemies, Minority Leader Franklin M. Drilon.
“To say that the law [covering public utility] is outdated is a gross understatement,” Drilon said. “Notwithstanding the antiquity of the [PS law], it is the law [that] defines which entities shall be considered a public service and, interchangeably, a public utility,” he explained.
Drilon pointed out that “today, telecommunication and Internet services in the Philippines are among the slowest and most expensive in the region.”
“There are a few options for safe, efficient and reliable public transportation [and] power supply remains a problem with citizens forced to accept outages as a usual occurrence,” he added. “Water is available only at limited times during the day, with shortages now part of every Filipino’s ‘new normal.’”
Drilon griped that “water, electricity, transportation, communication are supposedly basic needs, but their adequate and efficient supply cannot even be guaranteed to the Filipino.”
Defining public utility
DRILON believes these problems persist due to the absence of choices and competition. Salceda shares his view that lack of competition is partly attributable to the PS law. The latter’s definition of public service is being used to define public utility, the operation of which is limited to Filipino citizens or corporations controlled by Filipino citizens.
“Competition and foreign investment are inhibited because limitations that should only apply to the operation of a public utility are usually also applied to all public services,” Salceda said. “This situation is caused by the ambiguity in the definition of public utility that is often used interchangeably with public service under Commonwealth Act 146 [the PS Act].”
Senate Bill 13 provides a limited definition of the term public utility, while opening up other public services to the market, proposing amendments to transfer the powers of the Public Services Commission to the appropriate administrative agencies.
The bill at the Lower House, meanwhile, seeks, among others, to prescribe a 12-percent cap on rate of return. It also seeks to prohibit income tax as operating expense for rate-determination purposes for public services, including public utilities, consistent with administrative and judicial pronouncements.
Retail trade liberalization
Salceda said it is unfortunate that despite the passage of Republic Act (RA) 8762 almost two decades ago, the RTL law failed to boost the growth of the country’s retail trade sector.
By comparison, the country lags behind its neighbors in the Association of Southeast Asian Nations (Asean) in terms of investment growth in this sector, he added. Needless to say, RA 8762 has failed to accomplish its objectives.
Salceda has refiled the amendatory bill seeking to set the minimum paid-up capital and locally produced stock inventory requirements for foreign retail businesses.
Villafuerte also refiled his version of the bill to amend the 19-year-old RTL Act.
His proposed bill also seeks to lower the minimum paid-up capital of foreign-owned businesses. From requiring $830,000 to invest in the country, a foreign firm would only need $200,000 to enter the local retail industry.
Updating the FIN list
VILLAFUERTE is also seeking amendments to the FI Act of 1991 to delete the “practice of professions” from the items listed on the Foreign Investment Negative List (FINL) promulgated by the President.
The bill also intends to lower the employment threshold to 15 for small and medium-sized enterprises (SMEs) established by foreign investors with a minimum paid-up capital of $100,000.
He said the bill also “hopes to facilitate the transfer of technologies by attracting FDIs and further hopes to make the Philippines more accessible to foreign investors and generate more employment opportunities in the country.”
For Panelo, the Duterte administration is on the right path in attracting more FDIs, noting that the current business climate is more attractive to foreign investors. This is especially true after the administration ushered the golden age of infrastructure with the President’s “Build, Build, Build” (BBB) program.
In the Senate, the one pushing for the counterpart bill to amend the FI Act is Sen. Sherwin Gatchalian, chairman of the Economic Affairs committee.
National transport strategy
HOUSE Bill 306, or an act establishing the policies for the formulation of the National Transport Strategy for the Philippines to 2050, has also been filed.
According to Salceda, there is a need for a long-term transportation road map considering the increasing population, high urbanization rate and requirements for the country’s economic youth in urban, rural and far-flung areas of the country.
The bill seeks to mandate the formulation of a 30-year National Transportation Strategy for the Philippines (NTSP) by prescribing the principles for the efficient and effective coordination of transportation and public-works projects in support of the BBB program of the Duterte administration. The bill also noted the need to strengthen the capacities of local government units (LGUs) in transportation planning and management beyond the present collaborative arrangement between the LGUs and the Department of Transportation (DOTr).
It also seeks to declare the policies for formulating the master plans in support of the NTSP to 2050.
Neda institutionalization
SALCEDA has also refiled the bill institutionalizing the National Economic and Development Authority (Neda).
The bill seeks to institutionalize the Neda as a lead integrator of economic development programs and policies. Doing so—as the bill’s author views it—would facilitate the planning, collaboration and coordination among government agencies. The bill also seeks to improve access to national program information, data and funding opportunities, support research of leading-edge, world-class economic development practices and information-dissemination efforts.
The bill also encourages strategic investments that strengthen competitiveness, foster job creation and promote energy independence, among others. It also seeks to help fight poverty and build prosperity for the greatest number of Filipinos while producing transformational economic diversification and work-force development outcomes for our country’s long-term sustainable economic future.
Tax bills
EARLIER, Presumptive Speaker Alan Peter Cayetano said the passage of the remaining tax measures of the Duterte administration will be the top agenda in the first four months of the chamber.
Lawmakers already refiled the Tax Reform for Attracting Better and High-Quality Opportunities, or Trabaho, bill which seeks to encourage investments by bringing down the corporate income-tax rate from 30 percent to 20 percent. The bill also seeks to modernize investment tax incentives to enhance fairness, improve competitiveness, plug tax leakages and attain fiscal sustainability.
The Trabaho bill, which is the second package of the Comprehensive Tax Reform Program, also aims to ensure that the grant of fiscal incentives helps bring in the greatest benefits, such as higher and more dispersed investments, more jobs and better technology.
Also, still to be approved tax packages is Package 1-B to reform the Motor Vehicle Users’ Charge.
Package 2 Plus
SALCEDA has also refiled HB 1026, or the Package 2 Plus, which proposes additional excise taxes on tobacco and alcohol products.
HB 1026 seeks to increase the tax on alcohol products to approximate the 40-percent to 60-percent sharing of alcohol and tobacco expenditure.
This bill seeks to increase the excise tax rates on alcohol products and the indexation rate to 10 percent to account for inflation and income.
Salceda also authored HB 304 covering the fourth package of the Duterte administration’s comprehensive tax reform program.
The bill seeks to reform the taxation of capital income and financial services in the country, by redesigning the financial sector taxation into a simple, fairer, more efficient, and a revenue-neutral tax system.
To achieve these, this bill proposes the following reforms: reduction in the number of rates of withholding taxes; unification of tax rates for interests, dividends and capital gains; harmonization of business taxes; and adoption of a regionally competitive tax system.
Valuation, assessment reform
SALCEDA also refiled HB 305, or the valuation and assessment reform bill.
The bill is designed to address the issues plaguing the current valuation and assessment system in the country, to maximize and optimize local revenue generation and, ultimately, to achieve the avowed goal of the Local Government Code to make LGUs become genuine partners toward national development and progress.
The low revenue collection of real property tax may be attributed to a number of factors, he said.
The bill seeks development and maintenance of a just, equitable, impartial and nationally consistent real property valuation based on internationally accepted valuation standards.
Under the proposed setup, the Bureau of Local Government Finance (BLGF), through the Real Property Valuation Service (RPVS), shall lead and manage the implementation of the provisions of the proposed bill vested, among others, with the development, adoption and maintenance of valuation standards consistent with generally accepted valuation standards, regulations and specifications for real property appraisal used for tax and other purposes. It seeks to ensure compliance therewith by local government units and other concerned parties.
PPP rationalization
THE proposed Public Private Partnership Rationalization Act has also been refiled.
This Salceda bill further enhances and reinforces the provisions of RA 6957 or the Philippine Build-Operate-and-Transfer (BOT) Law, as amended. It seeks to engender transparency in transactions, efficiency in the performance of project obligations, and putting additional thrust and impetus to the PPP program through a more robust cooperation between the public and private sectors.
Salceda said the measure seeks to institutionalize and strengthen public-private partnership in infrastructure and development projects, the value of PPPs in delivering the country’s infrastructure requirements and utilizing the efficiencies of private-sector participation is crucial to the success of the BBB program.
The measure, Salceda said, aims to promote public infrastructure financing by including joint ventures as PPP variants, opening capital markets for the financing of PPP projects in addition to equity and loans, and defining the roles and participation of local government units in PPPs.
Collective investment schemes
A MEASURE providing for the comprehensive regulatory and legal framework for Collective Investment Schemes (CIS) has also been refiled this 18th Congress.
The bill refers to the CIS as any arrangement whereby funds are solicited from the investing public and pooled together for the purpose of investing, reinvesting and/or trading in securities or other investment assets or different classes thereof as allowed under this proposed law.
Under the bill, all CIS shall be covered, regulated, governed and must comply with the requirements, rules and regulations set under this proposed law.
According to Salceda, countries, including the United Kingdom, Japan, Australia, Korea and Singapore, have adopted a single law to regulate all types of CIS.
Presently, he added the Philippines has various laws governing investment companies (mutual funds), unit investment trust funds (UITFs), and separate account funds or variable unit linked insurance products.
Easing investment constraints
IN recent years the Philippines has received a couple of credit-rating upgrades. Salceda considers such achievements as outputs of a generally stable political situation, strong remittances from abroad and improving fiscal position.
Panelo notes it is under Duterte’s leadership that the Philippines earned the highest credit rating in economic history with a BBB+ upgrade from global debt watchers Standard and Poor’s.
“Hence, to further strengthen and improve economic stability, the government should be committed to implement stronger administrative reforms and pass identified priority legislative measures that will help ease the investments constraints and facilitate simplicity in doing business in the country,” Salceda said.
Establishing a comprehensive regulatory and tax framework for all CIS products will eventually lead to a more competitive environment for the CIS industry and provide enhanced and uniform levels of protection to the investing public.
That would be a good tack, if University of the Philippines Political Science Professor Jean S. Encinas-Franco is believed.
Franco considers the investment scams as example of the President’s tendency to micromanage, especially on political matters.
“[But] the economic reforms, he lets his managers do it so he is not micromanaging in that aspect,” Encinas-Franco told the BusinessMirror. “The issues that he is very gung-ho on are issues that matter to the daily lives of Filipinos and that is why Filipinos feel his presence, like the one-stop shop or the war on drugs and, of course, that is security.”
Panelo hopeful
PANELO expressed hope that the delay in passing the 2019 budget by the 17th Congress would not be repeated.
“Well, the Supermajority is supposed to share the President’s legislative agenda and his vision on what kind of economy we are going to have in the last three years of his term,” he told the BusinessMirror.
Despite the delay in passing the budget and the high inflation, Panelo gave the President a 9 out of 10 rating.
“Given the fact that there has been what you call a derailment, still we are able to manage to slay the inflation rate,” he said.
Had it not been for these challenges, the President could have easily scored a perfect score of 10, according to the Palace spokesman.
Panelo said the public can expect the Duterte administration to achieve the same number of significant achievements, if not more, in the remainder of the President’s term.
Asked what the business sector can expect in the next half of the President’s term, Panelo said: “What they can expect from this President is that the ease of doing business will remain as is; and no corruption.”
By Jovee Marie N. Dela Cruz, Bernadette Nicolas & Butch Fernandez
July 21, 2019
