Existing laws already provide tax stability – Recto

Championing tax laws can have serious repercussions for a politician.

Take Sen. Ralph Recto, for instance. In the Thirteenth Congress (2004 to 2007), Recto as chairman of the Senate Committee on Ways and Means, sponsored numerous revenue measures, the most controversial of which was the Reformed Value-Added Tax (RVAT) law that increased the VAT from 10 percent to 12 percent.

Recto paid dearly for sponsoring an unpopular tax measure. He lost his reelection bid in 2007. Now, he is back in the Senate and is once again the chairman of the Senate Committee on Ways and Means. Unlike in the Thirteenth Congress, however, he is no longer keen on pushing for any new tax measure. He subscribes to the policy of President Benigno Aquino 3rd against imposing new taxes.

Has he finally realized that being identified with taxes is equivalent to political suicide? That the safest way is the populist way—articulate what majority of the people want and do so in the loudest voice possible?

Recto said he had no regrets about his sponsorship of the RVAT, saying this measure has been largely responsible for keeping the Philippines afloat during the worldwide economic recession. He said that he would do the same unpopular act again if the same circumstances present themselves. He quoted his grandfather, the eminent Don Claro Mayo Recto, in amplifying his belief on what a lawmaker should be.

“The duty of a member of this chamber is not to pander to what is popular but to uphold what is right,” the late senator once said.

He echoed that sentiment in his valedictory in the Thirteenth Congress: “If I shall end up as a footnote in history, I shall be blissfully content of being remembered as one who chose principles over popularity and did what was right rather than what was expedient.”

Recto said that the Aquino administration is correct in pursuing a policy against the immediate imposition of new taxes. He pointed out that the situation now is different from 2005 when the RVAT and other tax measures were enacted.

“Our existing laws already provide for tax stability,” he maintained.

Not worried about the deficit

He does not share the concern of a number of fiscal advisers of President Aquino on the P325-billion to P350-billion budget deficit forecast for the year. During the 2010 budget deliberations, fiscal and economic managers of the former Arroyo administration said they were projecting a budget deficit of P233.4 billion, or about 2.8 percent of the gross domestic product (GDP). The former administration said that the need to stimulate the economy made the former projection impossible to achieve.

The expected budget deficit for 2010 would be equivalent to 3.9 percent of the GDP. Recto is not worried about the “high” percentage of the budget deficit in relation to the GDP.

“The deficit is 3.9 percent but our economic growth is 7 percent, so we are ahead. This means our money is being used efficiently,” he explained.

He is convinced that the budget deficit could be bridged by nontax measures.

“Let us improve tax administration to plug the leakages. For every one percent of GDP gained from this effort, an additional revenue of P80 billion to P85 billion is realized,” he explained.

Another tack that he wants the Aquino administration to pursue is the rationalization of tax incentives.

“Many of them are redundant,” he noted.

He said the elimination of redundant incentives could mean billions in additional revenues.

Multinationals should pay taxes here

He also believes that the administration should convince multinationals to pay their taxes here.

“These foreign firms enjoy tax incentives here but they still pay taxes in their home country. We should convince them to pay their taxes here because he have numerous tax treaties,” he explained.

Another non-tax revenue source that the government should focus on are the government-owned and -controlled corporations (GOCCs) and government financial institutions, Recto said. He lamented the lack of fiscal discipline among the GOCCs and GFI, which is costing the government billions of pesos a year.

“The government should also look at the efficiency of GOCCs and GFIs and demand that they remit the dividends due to the national coffers,” he said.

All GOCCs and GFIs are supposed to remit 50 percent of their net earnings to the national government but most have failed to do so. Recto said that the Bangko Sentral ng Pilipinas has just committed to remit to the government its dividend of P9 billion.

“There would be billions more if other GOCCs and GFIs will also give dividends to the government,” he said.

Against BIR targeting micro businesses

He advised the Bureau of Internal Revenue against targeting tiangges, market stallholders, jeepneys and taxis in its effort to generate more revenues.

“There is little money involved there but it entails a lot of logistics. The BIR should concentrate on big business,” he said.

At the same time, he expressed the hope that the BIR is no longer collecting advance tax payments from big business.

“Frontloading of taxes is prohibited. The books of the corporations involved could no longer be examined once the BIR accepts advance tax payments,” he said.

He also said that the government could still provide the needed services even if it will not impose new taxes by entering into a partnership with the private sector. President Aquino made such a pitch in his State of the Nation Address when he said that a public-private partnership is needed to build tourism infrastructure, road networks, railway systems, and improved food supply chain Recto believes that the administration would get the needed support from the private sector.

“Private businesses made so much money in the previous years but they have not been investing. With their declared trust and confidence in the Aquino administration, I believe that they will be responding to his call,” he said. –EFREN L. DANAO SENIOR REPORTER, Manila Times