Senate sees more productive 2005

Only two measures out of the 1,874 bills and 148 resolutions filed in the Senate were approved by the chamber since the 13th Congress opened last July 26.

They were the rescheduling of the elections in the Autonomous Region in Muslim Mindanao from last October to August 2005 and the so-called "sin" tax bill, which seeks higher taxes for alcohol and tobacco products.

Senate Majority Leader Francisco "Kiko" Pangilinan, however, said the performance of the five-month-old Congress was satisfactory despite the meager output.

"The last five months was also a time for various committees to conduct hearings and public consultations. By January 2005, the public can be assured of the swift passage of many of the bills filed, since most of the paper work has already begun," Pangilinan explained.

He disclosed that the tax measures that would be prioritized by the Senate as soon as Congress resumes its session on Jan. 10 include the Lateral Attrition Bill, the proposed rationalization of fiscal incentives and the tax amnesty bill.

"By 2005, we hope to approve other bills now pending in our legislative mills. So far, we have made tremendous inroads in many key areas. Next year, we will get to the finish line," he assured.

The highlight of the performance of 13th Congress, according to Pangilinan, was the successful Senate Reform Agenda workshop held at the Westin Philippine Plaza last October to discuss the six main areas of concern in the country and to formulate a reform agenda for the next three years.

"The workshop has laid the groundwork for the Senate and forged critical cooperation between the majority and the minority on urgent and pressing issues that need legislative intervention," Pangilinan said.

The six areas of concern were fiscal reforms, financial reforms, job and income generation, security and peace and order, education and health, and good governance.

"The Senate Reform Agenda workshop was clearly a success. It hastened the legislative process and allowed us to identify key areas we should focus on. It is important for us to hit the ground running when we come back from our Christmas break. Much work has yet to be done," he added.

Next Agenda: VAT

For his part, Senate President Franklin Drilon, who met last week with officials of the Department of Finance (DOF) and Department of Trade and Industry (DTI), disclosed that the next revenue measure the Senate will tackle is the value added tax (VAT) system.

"The proposal is to remove certain exemptions and increase the rate. The removal of the exemptions has the potential to generate revenue of at least P28 billion while a two percent increase in rate will generate about P40 billion for a total of P68 billion," Drilon said.

The Senate has to temper these two proposals though because of its effect on consumers.

"While we need to raise revenues, we also have as principal consideration the social cost of these revenues. We will be giving the review of the VAT system the highest priority when we come back on Jan. 10, assuming of course, that we get it on time from the House," Drilon said.

The VAT system, which has not yet been approved by the sHouse, is the revenue measure which has the highest potential to generate additional revenues for government.

"This is the revenue measure which has the most measurable impact on our tax collection effort. Hopefully, we can bring our tax collection effort to about four percent of Gross Domestic Product (GDP) from the present 3.1 percent. We are not shelving it. We are not putting it to the back burner," Drilon said, pointing out that the VAT bill cannot be taken up in the Senate until it is approved by the House first.

Drilon said the BIR is proposing the removal of exemption for coal, natural gas and petroleum products and the raw materials for the manufacture of petroleum products.

"These are the two big items. Between these two, it should bring about P20 billion in potential revenues. The other proposals would be passenger cargo vessels of more than five tons, cooperative books, medical services and legal services," Drilon said.

For companies in the manufacturing sector which are already in the VAT net, the DOF said the increase is not significant. But for end-users like those who buy gasoline from the gasoline stations, it will have an effect.

"If you remove the exemption, that’s a 10 percent additional on the pump price," Drilon said.

Sen. Ralph Recto, chairman of the Senate committee on ways and means, has actually proposed a review of the 10 percent VAT apart from removing the exemptions. There are two proposals — remove the exemptions or increase VAT from 10 to 12 percent, Drilon said.

"The VAT collection is projected for 2005 at P174 billion. Without doing anything, under the present system, the expected revenue out of the VAT system is P174 billion. We are reviewing this because if you remove the exemption, you immediately impose a 10 percent VAT," he said.

Drilon explained that what Recto was saying is that maybe the Senate remove the exemptions over a certain period of time or impose a lower than 10 percent VAT for those who are already exempted.

"But to those who are already subject to the VAT, there is no plan to lower it from 10 percent. Otherwise, we will have a loss of revenue rather than an increase," Drilon said.

Meanwhile, the Senate has also engaged the services of former Customs commissioner Antonio Bernardo to help them come up with a better version of the lateral attrition bill.

Drilon disclosed that there have been previous consultations with Commissioner Guillermo Parayno on the attrition bill.

In so far as the amnesty bill is concerned, Drilon said there are a lot of objections to this proposed measure. "We will put this in the back burner if you are going to ask me," Drilon said.