Campaign promises

If there is one common thing that usually comes out during the political season, it is to hear from aspirants during elections their promises to ease our tax burden. But the problem with these campaign promises, especially if they come from candidates running for Congress, is that each of them is just one vote to fulfill a promise that requires collegial action of lawmakers.

This campaign promise would remain just a promise if these senatorial and congressional candidates cannot even commit their presidential timber to a platform of government that will support tax relief legislation. That is, if they win and be installed into power.

However, if the elected President exercises his or her power to legislate tax and tariff regulations as Chief Executive, this campaign promise can be fulfilled. Under our country’s 1987 Constitution, the President is vested with the power to legislate only if Congress is not in session.

If the incumbent administration has the numbers in both the Senate and the House of Representatives, there would be no problem if they all support the platform of government of the sitting President. Any attempts to override the tax or tariff executive fiat issued while Congress was not in session would be unlikely to succeed.

But in a multi-party system that we have, it is almost always problematic to pursue common legislative agenda. Especially like in the case of the incumbent administration of President Benigno “Noy” Aquino III who does not believe in the soundness of convening the Legislative-Executive Development Advisory Council (LEDAC).

What many presidential aspirants usually promise is that there will be “no new taxes” if he or she is elected into office.

This we heard from former Senator Aquino when he ran and won during the May 2010 elections. But for all intents and purposes, this might be in the mind of President Aquino who has frowned upon proposed tax relief bills pending at the Senate and at the House. In his mind, P-Noy promised only “no new tax laws” but not tax relief law. But who we are to second-guess what’s in the President’s mind?

The latest word from his official spokespersons at Malacañang has it that the President will continue to engage with Congress on the proposed lowering of income tax brackets. Senator Sonny Angara, chairman of the Senate ways and means committee, and his House counterpart, Marikina Rep. Miro Quimbo initiated the twin tax relief bills in Congress.

Angara’s bill seeks to amend the Tax Reform Act of 1997 to index to inflation the income subject to withholding taxes and gradually implement reduction of income tax brackets over a period of time to mitigate its revenue reduction for the government.

Angara belongs to the pro-administration Laban ng Demokratikong Pilipino (LDP) while Quimbo belongs to P-Noy’s Liberal Party (LP). Angara is currently in the first half of his six-year term ending in 2019 and is not a candidate for any higher public office in the elections next year. Quimbo, on the other hand, is running in next year’s polls for his third and last term as LP bet in his congressional district.

Even Speaker Sonny Belmonte has not given up on passing a bill lowering income taxes even if President Aquino is lukewarm to this tax relief initiative that must emanate from the largely pro-administration House. As for President Aquino’s objection, Belmonte quipped: “That is his opinion and he’s the outgoing President. He’d like to leave his own legacy, that’s not necessarily binding on anybody who may have a different outlook (in Congress).”

Based on the advice of Aquino economic and finance managers, Palace official spokespersons earlier shot down calls for the passage into law of the proposed tax relief bill. The Palace claimed studies made by the administration economic and finance teams showed it would be harmful for the country’s improving international credit and investment ratings.

Lately, however, the Palace soft-pedaled on its vehement objection against the pending tax relief bill in Congress. This after various stakeholders from business groups to foreign chambers of commerce and labor organizations issued their respective statements of support for its legislation.

Through Bureau of Internal Revenue (BIR) commissioner Kim Henares, the Palace expressed open mind to the tax relief bill if Congress would pass also an amendment of the law to allow the lifting of bank secrecy law against suspected accounts of big-time tax evaders.

It should be worthy to note the most recent tax studies that showed the Philippines implements one of the most tedious processes for paying taxes in the world and has the highest income tax rates in Asia. Citing a study by international audit firm Pricewaterhouse, Sen. Chiz Escudero noted the average income tax rate and contributions paid by a Philippine employer is 42.5 percent, or six percent higher than the average tax rate in the Asia Pacific.

Escudero, the vice presidential runningmate of fellow independent candidate Sen. Grace Poe, bared the findings of this study.

Speaking of studies, the BIR commissioner strongly took exception to a commissioned study done by London-based Oxford Economics. Henares questioned the claims of this study that 19% (or equivalent to P20 billion) of this annual cigarette consumption comes from illegal cigarette trade, and only about 86 billion sticks sold legally. Henares cited a similar study conducted by World Bank which reported only 5% of cigarette consumption come from smuggled sources.

So, such claim that government allegedly lost more than P22 billion in revenues due to rampant consumption of untaxed cigarettes was biased and inaccurate, Henares fumed.

For this year, BIR is looking at hitting their tax collection targets from so-called “sin” taxes through Republic Act 10351, otherwise known as “An Act Restructuring the Excise Tax on Alcohol and Tobacco Products.” This law adjusted the tax rates on cigarettes and other “sin” products from 15 years ago level and indexed this to inflation.

If the Aquino administration signed this into law in 2012, why does P-Noy now frown on this proposed indexation also of income tax rates to inflation?

There is enough time for Congress to approve this into law and give every fixed income earner more pesos in their monthly take-home pay that would have otherwise been deducted as withholding taxes.