Tax reform is the best example of a 'matuwid na daan' change (Business Mirror (Philippines))

AngaraREP. Romero S. Quimbo, chairman of the House Committee on Ways and Means, recently called on President Aquino to convene the Legislative-Executive Development Advisory Council (Ledac) to tackle the growing clamor for income-tax reform. As it’s a matter of taxation, the proposal was put forward by the House from where tax legislation must originate.

The Ledac was established in 1992 through Republic Act 7640 during the 9th Congress. It was authored by Sen. Neptali Gonzales, a noted political and law expert, and myself. The council was set up as a consultative and advisory body in which the country’s policy-reform agenda was drafted. The council serves as the mechanism to achieve cooperation between the President and Congress. It’s the medium to break political gridlock between a President and a Congress belonging to opposing political parties.

Chaired by the President, the council includes the Vice President, the Senate President, the Speaker of the House, seven members from the Cabinet, three senators, three members of the House of Representatives and three representatives appointed by the President, coming from local government units, the youth and the private sector.

At the time the Ledac was first established, the country was going through a tumultuous period, suffering a negative gross domestic product growth rate, high poverty incidence, a huge deficit and a paralyzing power crisis.

Broad and deep structural changes were needed. And the Ledac became the indispensable mechanism for galvanizing support and achieving the reform agenda.

The Ledac ushered in a politics of consensus. It flourished because the political leadership fostered a culture of collaboration rather than confrontation. Some political analysts consider the 9th Congress one of the most productive of the post-Edsa Congress because of the structural reforms it had enacted.

Today the country is in a similar juncture. It needs to undertake deep reforms and structural overhaul again-this time, in particular, of its outdated tax system that marginalizes many Filipinos, while enriching a few.

Currently, our income-tax rates are among the highest in Asean. These rates affect our global competitiveness and dampen our attractiveness to foreign investment, especially when Asean economic integration comes in full effect next year.

Sen. Sonny Angara, chairman of the Senate Committee on Ways and Means, sounded off this problem as early as the first quarter of 2014 as he filed Senate Bill 2149, which adjusts income-tax brackets and proposes a staggered decrease of tax rates over three years (for instance, from 32 percent to 25 percent). Revenue agencies sent mixed signals on their openness to the proposal, saying that income-tax reform should coincide with revenue-generating measures.

Recently, the Department of Finance endorsed to the President a so-called comprehensive tax-reform package, which included a reduction of income-tax rates (32 percent to 25 percent over six years) and an increase of value-added tax from 12 percent to 14 percent. The President reportedly thumbed down the proposal and asked for other revenue-generating or -neutral measures to be found.

Several analysts and groups, such as the Tax Management Association of the Philippines, have already proposed their own comprehensive tax-reform packages. A Ledac meeting is the most appropriate forum for such proposals to be vetted and discussed. With broad consensus, a reform agenda could be crafted and then implemented with deliberate speed.

Under past administrations, Ledac meetings were fairly regular given the council is mandated to meet at least once every quarter. MalacaAan Palace assures that coordination between the Executive and Legislative branches remains vibrant, though since 2010, only two Ledac meetings have been convened.

Comprehensive tax reform-aimed at striking an equitable balance between collecting revenues for government coffers and putting more into the pockets of Filipino families-should be an all-hands-on-deck affair. There is broad consensus that such reforms are urgent. A Ledac meeting should be convened.