Now there’ll be action

In an unbelievable display of arrogance, Speaker Pantaleon Alvarez held the nation to ransom while he bargained to retain his position. Several hundred of the country’s leaders and world diplomats sat waiting for one hour and 20 minutes while he fought to hold the mace of the House of Representatives. He won—the battle. But he lost the war. He hosted the State of the Nation Address (Sona) on July 23, but was forced down on July 24. Gloria Macapagal Arroyo became the new Speaker.

His shenanigans meant that the Bangsamoro Organic Law (BOL) was not signed as intended. This is a law the country has needed for decades (Arroyo tried to pass a memorandum of agreement on ancestral domain, by the way, but it had some constitutional issues that had to be resolved, but couldn’t be at the time). The BOL was passed the next day.

Arroyo was the president from 2001 to 2010. She wasn’t very popular, but she got things done, and that’s what matters. Yes, popularity helps a Philippine president, but it’s not the only factor. Persuasive capability is an equally desirable attribute. And that she has plenty of. I worked with her for over 30 years, since the time she was an assistant secretary in the Department of Trade and Industry in charge of garments and textiles. And I can assure you this is a hardworking woman.

So she will lead the House for the next 12 months (she’s in her third term). The House has been mostly acquiescent to the President’s wishes, but has not passed some of the more important bills needed as the recognition of their needs wasn’t there. Arroyo, as an economist, will recognize that need and push for the bills’ enactment into law.

For me—no, for the country—the most important thing right now is tax reform. The country has been saddled with a system of taxes that is convoluted, distorted and unfair to many. An inheritance tax of up to 20 percent that cripples the bereaved is but one of the many distortions that only encourage evasion and corruption.

Duterte urged Congress to pass TRAIN 2, and three other tax packages before they get diverted by the need to campaign for reelection, which will take up much of the legislators’ time. So we have scant months to agree on the detail of reform. In no contention is the need to reduce corporate
income tax, the main plank of TRAIN 2.

The Department of Finance (DOF) wants our taxes to be competitive with our competitors. Our neighbors are leaving us in the dust in attracting foreign investments. We garner but a fraction of what other countries attract.

A high tax is a principal reason. Why pay 30 percent of your profits to someone else when you can pay 22 percent (the average) in other parts of the region? And 22 percent is what Congress should aim for. But the loss from lower taxes must be replaced. We need money for the “Build, build, build” program.

So there have to be tradeoffs, which is where rationalization of incentives comes in. This has been very controversial, with business groups clamoring to retain incentives, and government asking to make them more reasonable. There’s room for some accommodation from both sides. The critical thing is that incentives must be simplified and made time-bound, as the DOF wants, but still be sufficient to attract new investors, as business wants.

Arroyo well knows this issue, so I believe we’ll see her craft a solution rapidly. She’s a driven, results-oriented woman.

The Senate President, Vicente Sotto III, will be equally driven. He’s turned out to be quite a surprise. Not the “Eat Bulaga” guy I’d imagined, but a thoughtful, intelligent man who quickly picks up an issue, understands it and, I hope (this is yet to be tested), acts as quickly as Arroyo does on it.

Tax wasn’t the only thing in the Sona. There was much else, and it was mostly about the future, not the greatness of the past. And it is the future we’ll be living in, so I like that.

The two proposals that would most help the poor are rice tariffication and universal healthcare, with no balance billing thrown in. I’m at a loss to understand why it’s taken so long to kick the National Food Administration out of rice trading. Every economist worth his salt has called for it. With NFA out and an open market for rice, its price goes down, and inflation goes down.

The 50-minute speech of the President was well thought out and covered most of the important issues to resolve this year. With two Congress leaders who are action-oriented, it should be an interesting year.

Email: wallace_likeitis@wbf.ph