Wanted: Congressional action now
Once we start thinking recovery and getting back to business, business is going to need all the help it can get. Some two million Filipinos will be looking to business people to give them jobs. They’ve suffered some 60 days and counting (for most of them live day-to-day), struggling just to get enough to eat, let alone anything else. The largesse of the DILG will soon evaporate and they’ll be left with nothing — unless they can be given jobs.
The Duterte administration has developed a well thought-out stimulus package that will help get business back on its feet. But we need Congress to participate, too. It needs to accept that we are in a crisis, the worst the world has seen since World War II. The crisis’ economic impact could even be worse.
The effects of COVID-19 won’t be over for years. There will be basic changes to societies and economies. There will be no return to “normal lives.”
Finance Secretary Carlos Dominguez III and his team have swallowed the bullet and recommended to Congress cutting five percentage points off the income tax that business pays. At a time when outstanding government debt is zooming into the stratosphere, that’s some 49.8 percent of GDP. As an aside, this won’t hurt the country’s credit rating. The rating agencies know what’s going on in the world, and they compare the Philippines with everyone else. The Philippines is still in a strong fiscal position when compared to other countries. It will retain its rating.
It’s a courageous step that, fortunately, won’t plunge the country into bankruptcy. The fiscal condition of the Philippines is probably the strongest in Asia—and one of the strongest in the world, as pointed out by an infographic released by The Economist.
What it must have now is for Congress to pass the law that will allow this step to happen. That law will also allow businesses to carry over the losses they’ve suffered from COVID-19. Congress has eight session days to pass this law before it goes on recess on June 5 so that the law can take effect July 1. I’ve no doubt the Department of Finance already has the implementing rules and regulations drafted, it’s the way they work. It’s up to Congress — are they going to help us get back on our feet or not?
Overseas businesses are looking at where to move some of their factories so they are not caught again with just one risky production site. Indonesia and Vietnam are attracting interest. We need something to shift interest to here. A five-percentage-point cut in the tax you have to pay will certainly stimulate that interest. Domestically, five percent less to pay in tax will be a great relief for companies struggling to get back to work. It will help them pay their workers.
Congress must also approve other job-creating laws before June 5. They’ve had these measures long enough and have argued them sufficiently to need little more discussion, only action. So let’s see that action. The most important of these measures are: the other four tax bills, important for the long-overdue rationalization of the mess our taxes had gotten into; and amendments to the Public Service Act to increase foreign investments in key economic sectors currently banned to them (a good job creator).
With the need to reduce costs, government will be looking at how to convert more of the “Build, Build Build” (BBB) projects into public-private partnership projects. There’s a bill in Congress proposing amendments to the build-operate-transfer law that will widen the scope of what foreign investors are allowed to do. That should pass, too. Investing hugely in building infrastructure is a well-known method of getting a damaged economy back on its feet, as well as giving people jobs. We need more people helping to accelerate the rebirth of BBB.
The Freedom of Information Act must be passed to improve transparency in government transactions and raise the country’s global anticorruption ranking, a major prerequisite among potential foreign investors, and demanded by the public. The Philippines’ fall in the Transparency International index is in major part due to the government’s failure to prosecute corrupt officials. It’s not enough that corrupt officials are terminated, they need to be put in jail.
That’s it. Can/will Congress do it? If they truly care for us, and the two million who need jobs, they’ll give us all those bills. At the very, very least, they must give us the five-percent tax reduction.
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