3 major economic bills to become laws next week

Speaker Jose de Venecia Jr. announced yesterday the signing of three major economic bills by President Arroyo next week to jumpstart the economic recovery program of the government.

The three major bills to be signed into law are the Securitization Act; an Act clarifying the tax exemptions for Offshore Banking Units (OBUs) and Foreign Currency Deposit Units (FCDUs), and the Act rationalizing the provisions on the documentary stamp tax of the National Internal Revenue Code (NIRC) of 1997.

"I challenge all of you from the business and industry sector to be upbeat about the economy because the country has gained a fresh opportunity to turn the economy around with the (enactment of the) three major reform bills‚" De Venecia said before a luncheon forum with the country’s top stock brokers yesterday.

As principal author of the Securitization Act, De Venecia explained the proposed measure will complement the Special Purpose Asset Vehicle Act earlier enacted into law.

He said that among the salient points of the Securitization Act include the removal of taxes, rationalization of the regulatory system and the creation of Special Purpose Vehicle (SPV) as the transferee of assets and the issuer of securities.

"The Securitization Act is intended to raise domestic savings that will finance investment growth. It will also expand available long-term credit for housing, infrastructure and other development priorities for the country," De Venecia said.

The House leader and Antique Rep. Exequiel Javier both pointed out that the proposed measure clarifying the tax exemptions for OBUs and FCDUs will restore their tax exemptions that "will go a long way in restoring the confidence of foreign investors in the country."

Javier, vice chairman of the House ways and means committee, said the proposed legislation will prevent the government from incurring $13-billion potential loss in earnings should the OBUs and FCDUs get out of the country.

Javier said that the act clarifying the tax exemptions of OBUs and FCDUs was prompted by a situation in which the Philippines "changed the rules in the middle of the game" with serious economic consequences.

Out of the 24 OBUs formerly operating in the country, according to Javier, only nine remain because their operations became unsustainable.

"A potential loss of $13 billion was projected if they discontinued their operations in the country. The act will also give access to lower-interest credits for business in the country borrowing dollars for their operations," Javier stressed.

On the other hand, De Venecia said the final version of the Documentary Stamp Tax Bill was already approved by the bicameral conference committee.

He said the legislation removes the documentary stamp tax on secondary trading and debt and equity instruments and on the borrowing and lending of securities traded at a registered exchange for a five-year period from the date of effectivity of the law.

"This is intended to boost the country’s capital market for corporate debt papers and to improve the ability of Philippine companies to borrow capital," De Venecia said.

De Venecia said that private companies will gain access to the debt and capital market, where before they relied solely on bank loans whenever they needed capital.

He said that the bill hopes to generate an estimated P4.9 billion a year from the leveling of taxes on time deposits, bonds, loan agreements and government securities. – Jose Rodel Clapano