Aquino can do it

(Second of two parts)

I’m not giving up. I would like President Aquino to take this message as intended and spend the next five months correcting these deficiencies. If he ignores it, it will be left as a negative legacy of his administration. It’s up to him, but I know what I’d do: I’d step in and order the immediate reversal of these wrongs on business.

And he can. He can agree that the taxes paid by the water concessionaires can be included as a recoverable expense, and approve the overdue toll increase. He can agree that Shell Philippines Exploration doesn’t owe any more tax. He can stop the doubtful new contract to maintain MRT-3 and reappoint the well-proven and competent Sumitomo. He can pay Piatco. Yes, the government has the right to appeal, but why do so? If you haven’t made your points in five years, you won’t in five months. The court listened, and decided 10-0. You’d think that’s a pretty forceful decision, wouldn’t you? He can pay Thales what the contract calls for and has been overdue for three years. It’s a contract approved and signed by the government, but deliberately halted for no valid reason by the same government. He can order the BCDA to pay the court-ordered P1.42 billion so Camp John Hay Development Corp. can vacate the property. And he can confirm that the buyers and lessees of properties retain the rights to them.

Internal Revenue Commissioner Kim Henares defends her questioning of the tax-exempt PEACe bonds. And it could be that she was right, that the bonds should not have been tax-exempt. But that’s exactly my point: Buyers bought on the sovereign promise that they’d be exempt; that’s what encouraged purchase. If it’s decided later that it was disadvantageous to the government, it’s too late. A deal was struck; you must live with it and be more careful in the future. You can’t retroactively amend it. If you do, the message is very, very clear: You can’t trust the word of the Philippine government, as it may change its mind later. The courts agreed, but the damage to the government’s image was done.

As to VAT refunds, the Bureau of Internal Revenue responded by saying: “The rules, law and jurisprudence are clear: all VAT refunds are processed within 120 days. Taxpayers will know within this 120-day period what they have to do: either they will be granted or denied a refund. If they do not get a response, the refund is deemed denied. When denied, they have 30 days within which to appeal to the court. Refunds are like exemptions: taxpayers will have to prove they are entitled to the refund.”

Henares added: “Refunds are similar to government expenditures. These will have to be based on a justifiable basis; otherwise, responsible officials can be charged with malversation or plunder, depending on the amount involved. We are well aware that in the past, there had been several scams involving refunds.”

I wouldn’t doubt there have been scams (although I’d appreciate a list), but there have been many, many more cases that weren’t scams, were legitimate—and promised refunds that haven’t been received for far too long.

For most of the companies I deal with, the VAT should never have been paid in the first place as they are VAT-exempt. But the bureaucracy doesn’t seem able to handle that. (And there’s a good question: Why not? Why complicate the process?) So companies pay, then file for a refund. That should be a fairly simple, automatic administrative matter, you’d think. And 120 days to confirm should be more than enough. I’d suggest that in today’s modern computerized world, 30 days is more than enough.

But then to say that if a decision is not reached in 120 days the application for refund is considered denied is nothing short of disgraceful. The arrogance of it is astounding. The disdain for what business would think is incredible. What the BIR should say is that if a decision is not reached within 120 days (or my preferred 30 days), the application is considered approved. If that in some way conflicts with law or puts BIR employees at risk, change the law. I suggest that the “presidentiables” include such a change into their program of governance: Set deadlines for government approvals, on everything, beyond which that approval is automatically granted. Force performance from the government.

In the interim, the President should order resolution of all outstanding VAT claims before he steps down. If there are a few that are truly dubious, then they should be exemptions—but a small number of exemptions.

I agree with Secretary Sonny Coloma: “Under President Aquino’s leadership, the Philippine economy has become more globally competitive; the country has earned investment-grade ratings; the business environment improved toward heightened customer-friendliness; and, the country is well on its way toward sustaining a high-growth trajectory.” But it could be much better if the business that is here were better treated. He said, “And that’s why every day of the remaining six months of President Aquino’s term, we will step up and widen the reforms in governance…” Well, those reforms should include correcting these wrongs, not defending them.

To sum it all up, the government said: “We appreciate the inputs and support we have received from the business community as we endeavor to further improve our macroeconomic performance.” If it means that, then it should take the actions I’ve recommended to prove it.

Incidentally, since 2006 I have been raising concerns about the Philippine government not honoring its word. I wrote “Sanctity is not just a word” in September 2006; “Consistency is needed” on Sept. 27, 2012;  “It’s not just cash saving” on May 12, 2015; and “Honor your commitments,” a special report run in December 2015.

Nothing happened in those nine years. I hope it won’t be nothing again. Mr. President, please step in and correct these wrongs. Now.

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E-mail: [email protected]. Read my previous columns: www.wallacebusinessforum.com.