Wednesday, March 29, 2023

Delivering Stories of Progress


DOF, Congress fastrack economic reform measures

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By Victoria “NIKE” De Dios

The Department of Finance (DOF) worked closely with lawmakers in 2020 in providing technical support leading to swift congressional action on legislative measures that aim to rescue businesses, provide emergency assistance to vulnerable sectors and keep the economy afloat amid the crisis arising from the COVID-19 pandemic.

Among these measures are the two Bayanihan laws—the Bayanihan to Heal As One Act (Republic Act or RA No. 11469) and the Bayanihan to Recover As One Act (RA 11494), and the Corporate Recovery and Tax Incentives for Enterprises (CREATE) bill, the DOF’s Domestic Finance  Group (DFG) said.

In its report to Finance Secretary Carlos Dominguez III, the DFG said it has also assisted the Congress in finalizing the Financial Institutions Strategic Transfer (FIST) Act, which was ratified by both legislative chambers last year, and is awaiting the signature of President Duterte for its enactment into law.

The DFG, which is headed by Undersecretary Gil Beltran, also provided technical support for the drafting of the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) bill, which the DOF expects to be passed this year.

According to the DFG, the DOF provided data and estimates to the concerned legislative committees and legislator-proponents on the revenue implications of these reform measures.

“I think you have made great achievements last year,” Dominguez said in response to the report of the DFG’s Fiscal Policy Planning Office (FPLO) and Policy, Research and Liaison Office (PRLO).

CREATE, which proposes to lower the corporate income tax (CIT) for micro, small, and medium enterprises (MSMEs) from the current 30 percent to 20 percent, is envisioned to be the largest economic stimulus package for private enterprises in the country’s history.

It aims to support the government’s efforts to keep businesses operating this year and preserving or creating hundreds of thousands of jobs, especially among MSMEs, which account for 99.5 percent of local enterprises and employ two-thirds of Filipino workers.

The measure, which is a modified version of the earlier Corporate Income Tax and Incentives Rationalization Act (CITIRA) bill, also provides for flexibility in the grant of fiscal and non-fiscal incentives, which will be critical as the Philippines competes internationally for high-value investments and more job opportunities this year as part of its recovery from the coronavirus-induced global economic slump.

FIST, meanwhile, will allow banks to dispose of non-performing loans and assets through asset management companies.

This measure is an improved version of the special purpose vehicle bill that was created in the early 2000s, but which was a belated response to the Asian financial crisis that struck in 1997.

Another measure—GUIDE—aims to form a special holding company to enable government financial institutions (GFIs) to infuse equity, under strict conditions, into strategically important companies facing solvency issues.

The two Bayanihan laws, meanwhile, included the largest social protection program in the country’s history that provided emergency cash grants to low-income families and wage subsidies to workers in small businesses; the expansion of medical resources to fight COVID-19 and ensure the safety of our frontliners; channeling of additional capital to GFIs to lend more money to pandemic-hit sectors; and allocations for the COVID-19 vaccination program, among others.

The DFG worked on 210 briefers and 159 position papers to assist DOF officials during congressional hearings.

It shepherded key legislative measures in the Senate and House of Representatives.

These include House Bill (HB) No. 6136 or the proposed Motor Vehicle Road Users’ Tax (MVRUT) Act, which was passed on third and final reading in the House of Representatives; and the laws that increased the excise tax rates on tobacco products, alcohol, and e-cigarettes.

To facilitate the DOF’s work on these measures and other pending bills, the DFG set up a web-based Legislative Monitoring Portal (LMP) within the Department, which contains all the legislative information from both chambers of the Congress as well as the tracking of the DOF position papers on these measures.

In 2020, the DFG also monitored fiscal indicators and reviewed revenue estimates to help the economic team formulate the fiscal/revenue program for 2020 and update the medium-term fiscal plan for 2021-2022.

It also lent technical support during negotiations on the Korea Free Trade Agreement and the Philippines’ membership in the Regional Comprehensive Economic Partnership (RCEP).

This year, the DFG will continue to engage the Congress on the passage of the other priority bills of the Duterte administration.

These priority bills include Packages 3 and 4 of the comprehensive tax reform program (CTRP), namely, the proposed Real Property Valuation and Assessment Reform Act (RPVARA), and the Passive Income and Financial Intermediaries Reform Act (PIFITA).

Also, the DFG will work this year on the passage of amendments to the Public Service Act and Retail Trade Liberalization Act; the MVRUT bill; a new fiscal mining regime; the Warehouse Receipts bill; and a law converting the Insurance Commission (IC) into a collegial body.

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