Priority measures

Just recently, leaders of both houses of Congress have committed to pass 20 priority bills within the remaining period of the current session.

Members of the Cabinet and congressional leaders came up with the list of priority bills during the fifth Legislative-Executive Development Advisory Council (LEDAC) meeting led by President Marcos. Of the 20, half are considered top priority. These priority bills are related to addressing rising prices, job generation and poverty reduction.

Let’s first take a look at the bill that seeks to rationalize the mining fiscal regime.

It has been noted that the inconsistencies in fiscal policy have stalled the development of the mining industry. According to Chamber of Mines of the Philippines chairman Michael Toledo, the implementation of a mining fiscal regime would cure a lot of investors’ uncertainties regarding the country’s mining policies.

The current mining fiscal regime only taxes mines operating within a mineral reservation. The proposed bills will introduce a windfall profit tax scheme on net income and margin-based royalty on gross income of operations outside mineral reservation areas.

Earlier, the mining industry and government officials have reached a middle ground on the tiering of a proposed windfall profit tax. Basically, when profit margin grows, then a higher tax rate would be applied.

Meanwhile, under the current regime, mining obligations vary depending on the mining agreement, which can be undertaken via mineral production sharing agreements (MPSA) or financial or technical assistance agreement (FTAA) and according to the Department of Finance, because mining agreements can be undertaken in several ways, this results in a complex tax system and investor uncertainty.

While the government wants to get a bigger share, this should be tempered with the need to encourage investments so as not to kill the proverbial goose that lays the golden egg.

Also included in the top 10 priority measures is the Reform to Philippine capital markets bill, including a tax cut on stock transactions.

The Capital Markets Efficiency Promotion Act bill seeks to amend the Tax Code by reducing taxes on stock transactions from 0.6 percent to 0.1 percent of stock value and the tax on dividends imposed on non-resident aliens from 25 percent down to 10 percent to harmonize the cash and property dividend rates. The proposal also imposes a debt transaction rate of 0.1 percent, in parity with the reduced rate for stock transactions.

The Philippines has the highest stock transaction tax and charges among major economies in the ASEAN region. The Philippine Stock Exchange also has the fewest publicly-listed firms among the big ASEAN-6 economies at 275, compared to the second lowest which is Singapore which has 640 listed companies.

Albay Rep. Joey Salceda who authored the measure earlier explained that the level of activity of the local market also has a direct effect on the strength of the pension and health funds such as those of the Social Security System and the Philhealth, the charters of which strictly limit equities exposure to PSE index stocks.

He also pointed out that the high tax rate on dividends received by foreign non-resident individuals also discouraged foreign investors from buying Philippine stocks.

Also included in the top 10 priority measures are the proposed amendments to the Right-of-Way Act, amendments to the Electric Power Industry Reform Act or EPIRA, the CREATE MORE Act, amendments to the Foreign Investors’ Long-Term Lease Act and amendments to the Rice Tariffication Law.

The Corporate Recovery and Tax Incentives for Enterprises (CREATE) MORE bill makes key amendments and enhancements to the tax regime introduced by the CREATE Act to clear inconsistencies and ambiguities.

One of the major proposed amendments will allow companies that choose to be under the enhanced deduction regime (EDR) to be subject to a 20 percent tax rate on taxable income derived from registered projects or activities during each taxable year. The bill seeks to lower the standard corporate income tax rate for companies employing the EDR to incentivize them to choose this route.

It also proposes implementing a registered business enterprise (RBE) local tax at the rate of up to two percent of gross sales for companies eligible for the tax holiday or EDR and this would exempt companies eligible for this tax rate from all other local taxes.

The CREATE MORE bill also authorizes the different investment promotion agencies to issue various types of special visas to help attract highly skilled foreign talents.

Another priority measure is a proposal to reinforce the opening of the economy to foreign investments by extending the lease of private lands, excluding agricultural ones, to foreigners from a maximum of 75 years to 99 years.

Also proposed is the amendment to the Right-of-Way Act to expedite the implementation of critical infrastructure projects by streamlining right-of-way acquisition.

Equally important is the proposal to restore the price stabilization and supply regulation functions of the National Food Authority (NFA) by amending the Rice Tariffication Law which stripped the NFA of these powers. The President earlier certified the bill as urgent.

The RTL amendment is expected to bring down the price of rice by P10-P15 per kilo.

Meanwhile, included in the second priorities list are the Open Access in Data Transmission Act and the Waste-to-Energy Bill.

We do not need more laws, especially those that are self-serving and politically motivated. What we need are better laws. The people are desperately hoping that these proposals will result in better and more effective ones, laws that will improve and have a major impact on their lives.

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