The Speaker of the House was reported to have sent word to the committee handling the tax reform proposal to slow down its approval. Isn’t this an important and urgent administration measure?
One wonders what game our politicians are playing. Are they waiting for manna from Ben Diokno? They passed a tax law amendment in four days last December and one can only assume their sense of urgency was because they got manna from the cigarette company that wanted it.
Unless the tax reform proposal is passed, the administration may not be able to carry out its very ambitious infrastructure spending program. That would have serious repercussions on the overall economy… and make Duterte a failure.
Note that analysts of foreign and local financial institutions have premised their rosy predictions for the Philippine economy on that promise of massive infra spending. Without it, their GDP growth projections would have to be scaled down. We may even lose our investment grade credit rating.
As it is, because of the uncertainty over tax reform, infra spending and external factors like the Trump threat to our BPOs, the peso and the stock market have succumbed to strong selling pressures. The depreciated peso means higher consumer prices all around, starting with gasoline and other petroleum products. Power rates will surely follow that upward swing.
I realize that not many of our congressional leaders are literate in economics but it is their responsibility to listen to those who are. The most literate among them who also has a strong political sense is Joey Salceda. And Joey is doing all he can to ensure early passage of the tax reform proposal. But he is just one and he is outside the political kulambo.
This is where the President should come in. I know President Duterte has made statements in support of tax reform. But he keeps calling it “tax reform law ni Dominguez.” That’s why Congress is giving it a hard time. Dapat tax reform ni Duterte... He must put some political capital behind it. The President must own this tax reform proposal.
If the President knows what is good for him and his administration, he will put some of his own skin at risk with this tax reform agenda. Congressmen don’t care much about Sonny Dominguez. They may even dislike him for any number of reasons. Sonny tells it like it is and that means he comes on too strong for the sensibilities of lesser mortals in Congress.
But President Duterte is supposed to be the president with political clout and political will to produce positive results for this country. He has not used this power to move his administration’s agenda.
Other than tax reform, he must invest political capital on getting emergency powers to fix the traffic problem. Up no now… wala pa rin yan and it’s almost a year into his watch.
The President must call the leaders of Congress to utilize the supermajority to get the tax reform bill passed with as little mangling as possible. This is the time to impose discipline along party lines and not on that death penalty proposal.
Investors, foreign and local, are looking at the tax reform proposal as the litmus test of what the Duterte administration is capable of delivering. If this does not happen, the economic projections for next year will be more grim than we would like it to be.
On the other hand, I also do not see DOTr and DPWH having the capacity to spend all that money. So maybe, non passage of the tax reform package will give them a convenient excuse to deliver nothing much this year. It will almost be as if the Roxas-Abaya team never left.
A reader from northern Mindanao wrote me to complain about the non implementation of the BSP circular on the one day check clearing that was supposed to start last Jan. 20. The reader suspects banks do not want to give up the money they make on the float.
I asked the BSP and here is the reply of Deputy Governor Nestor Espenilla Jr:
The Check Image Clearing System (CICS) was indeed launched on Jan. 20 as agreed with the member banks of the Philippine Clearing House Corporations (PCHC), the bank consortium which operates the check clearing system in the Philippines.
The CICS project aims to speed up the clearing of checks nationwide so that funds are available next day. This will be accomplished by processing only the electronic image of checks instead of transporting and processing the physical checks themselves. Operationally, this means that when a check is presented at a branch, it is simply scanned.
The CICS migration is not an easy undertaking especially for big banks with large branch networks as it involves retrofitting all branches with equipment, installing reliable connectivity, training branch personnel, and also preparing customers to use the system.
Truth be told, there have been some operational hiccups since launch. While most banks were able to switch on immediately, many were not able to do it for all their branches. A few were unable to make the leap at all on day one for one reason or another.
BSP has given the banks some leeway as a practical matter to iron out all the kinks and get their act together, but has given an ultimatum for full migration by April 21, 2017.
Meanwhile, BSP is closely monitoring progress. The system is currently operating on two rails, one for CICS-compliant banks that already deliver on one-day clearing and another for non-compliant banks and branches were hybrid workarounds are being done to close the gap.
From what we’ve observed so far, progress is happening exponentially. We request the public for a little more patience. We’ll surely get to universal one-day clearing very soon. And from there, once the CICS has stabilized, we’ll be shooting for universal same-day clearing and funds availability.
May I also add, that we are making another big leap soon under the National Retail Payment System (NRPS) project which we will be launching this year in partnership with the banking system the Batch Electronic Fund Transfer system.
This will allow convenient and affordable electronic account to account fund transfers in lieu of issuing paper checks as a means of payment. Under this system, same day funds availability will be the norm.
We think this will definitely be a payments game-changer in the Philippines. To their credit, our banks have come around to cooperating with the BSP and themselves for the common good and also to rapidly expand the domestic market which will be a win-win for all.
I hope this information helps, Boo.
Boo Chanco’s e-mail address is firstname.lastname@example.org. Follow him on Twitter @boochanco.