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Can Congress act?

/ 05:20 AM September 13, 2018

In 2016, Filipinos said they wanted real change. So they elected Rodrigo Duterte, who promised the change they were demanding. Elsewhere in the world, the same message was being delivered in many countries — unfortunately, in America’s case, with disastrous results.

Part of that change has occurred: Infrastructure is actually being built, much overdue and much-needed tax reform is happening, and peace with the Bangsamoro is in the offing. But there’s still much to do, and part of it is the need to accelerate passage of some much-needed laws. Here, the President needs the support of Congress, which needs to pass these bills.

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I’d put at the top of this list the task of finishing the administration’s tax reform. We are living with a system that hasn’t been changed in 31 years. Benigno  Aquino III, when he was president, even boasted that he wouldn’t make any change to it.

The Department of Finance has come up with a well-researched reform plan that simplifies, reduces and realigns taxes in a way that will greatly improve the economy, to the benefit of the people. I’m glad to see the House of Representatives has approved it, and I hope the Senate will, too. Passing the full tax package into law is needed before our legislators get diverted to campaign mode with the coming midterm elections.

People are worried that these taxes will add to inflation. But they won’t; if anything, they will achieve the reverse. Prices could come down IF (I admit it’s a big if) companies pass on the savings that lower taxes will give them to the price of their products or services. Competition might force it; whatever the direction, this can only be good.

TRAIN 1 was the only plank of the changes that could be inflationary — but I hasten to say that the inflationary effect is far less than some are propagating. TRAIN 1 was just a case of unfortunate timing. World oil prices rose, the rice supply ran short, vegetable harvests were poor and fish was in short supply. All that had a bigger impact.

So the Tax Reform for Attracting Better and High-quality Opportunities package should be passed now. Next on the list that needs urgent passage is the rice tariffication bill. Give Filipinos cheaper rice now. For years — no, decades — it’s been abundantly clear to anyone who understands these things that the National Food Authority is a disaster — a P170-billion disaster. Its appalling mismanagement of something this essential to Filipino life has to stop.

But the bill has a major flaw; it still allows the NFA to control the importation of rice by the private sector. The agency will only screw that up; it should be completely out of the picture in the trading of rice. Its role should only be to hold a buffer stock to ensure that there’ll be enough supply in times of emergency.

A fully open market, allowing anyone capable and willing enough to import rice, will eliminate the cartels and the distortion of prices. The only control needed is a tariff (unfortunately, our rice production system is still too inefficient, so it needs protection). Without tariffs, rice prices could be halved, but if a reasonable tariff is applied — 35 percent is recommended—prices could come down by P7 per kilo. That can reduce inflation by a significant 0.4 percentage points.

Other bills I’d put high on the list that Congress should pass this year include the  Freedom of Information Act; emergency powers to address traffic; amendments to the Build-Operate-Transfer  law and the Central Bank charter; the Universal Health Care Act; and the creation of the Department of Disaster Management. But the first three are the really critical ones.

I would also split the consideration of a constitutional change into two: political change (including federalism), and economic change. Also, the proposal to fully open up the economy should be passed now, so the people can vote on it next May. Those restrictions should not exist in today’s globalized, hi-tech world. That should allot more time to the careful review of much more complicated political changes being proposed. Whether the Philippines should be a federal state, for instance, is an issue that takes time and needs to be thoroughly discussed.

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One of the things missing in the past has been cooperative action. Both Houses have boasted on the number of bills they’ve passed. But they’ve been different bills, so no law emanates from them. And they’ve not been bills the administration wanted.

The country needs laws, not bills. This may now change with new leaders like Tito Sotto and Gloria Arroyo, who are both willing to work with Mr. Duterte. Both are action-oriented people who know how to get the cooperation of their party-mates. Let’s hope that they do come up with these laws.

E-mail: wallace_likeitis@wbf.ph

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TAGS: congress, inflation, infrastructure project, Like It Is, National Food Authority, NFA, Peter Wallace, Rice Importation, Rice supply, Rodrigo Duterte, tax reforms, TRAIN Act
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