Regime railroads neoliberal measures as pandemic response
The Duterte regime is exploiting the Covid-19 pandemic to railroad the enactment of neoliberal reforms that it has long been pushing for. It repackaged the said measures under the PH-Progreso (Philippine Program for Recovery with Equity and Solidarity), a proposed program which purportedly aims to boost the economy which has been gravely devastated by the lockdown. The program primarily covers the old scheme to cut the corporate income tax and the implementation of infrastructure projects under the Build, Build, Build (BBB) program.
Even before the onslaught of the Covid-19 pandemic, the economic growth in the Philippines has been slowing down for three years already. The economy nosedived as a result of the lockdown and the implementation of restrictions on production and service activities. In Metro Manila alone, 53% of enterprises in the service sector were forced to close due the lockdown. Approximately 73% of manufacturing operations in the national capital, Calabarzon and Central Luzon were also stopped. The import-export and transportation sectors were put to a halt. Because of this, nearly 23.7 million workers are in danger of losing their jobs. More than 400,000 small and medium enterprises also lost their incomes and are in danger of closing due to bankruptcy. The economic managers of the Duterte regime recently admitted that the local economy shrank by 0.2% during the first quarter of the year, the worst in more than two decades.
In response, the World Bank-trained economic managers of the regime announced the PH-Progreso proposal on May 14. Several associated bills have been filed in Congress.
Lower taxes for big capitalists
The PH-Progreso aims to railroad the lowering down of taxes on corporations as an incentive to foreign capitalists who wish to invest in government programs. This was originally proposed under the Tax Reform for Attracting Better and Higher Quality Opportunities (Trabaho) Bill, which later on became the Corporate Income Tax and Incentives Rationalization Act (CITIRA) which is now pending before the Senate. The CITIRA is the second tax reform package which foreign businesses, particularly US companies, have long lobbied for.
Under the new Corporate Recovery and Tax Incentives for Enterprises (Create) Bill, the corporate income tax will be lowered from 30% to 25%. It will also give the president the authority to tailor-fit tax incentives and exemptions for big companies. The regime aims to implement the reform as early as July by railroading the passage of the said bill before the Congress closes its session on June 5.
Based on conservative estimates of the National Economic Development Authority, the reactionary state will lose about P259 billion in corporate taxes until 2022 should the tax cuts be implemented. Multinationals and companies that rake in billions of profits in the country will primarily benefit from this reform.
Relatedly, Duterte ordered the Bureau of Internal Revenue to issue an order to provide tax exemptions and incentives to big companies that responded to his call for donations amid the pandemic. Under the said regulations issued on April 6, the total amount of financial and material donations given by corporations will be fully deducted from their gross incomes. While cutting corporate taxes, it imposed heavier taxes on the poor. Invoking his emergency powers, Duterte issued an executive order which implemented a 10% tax increase on imported crude oil and petroleum products. This is expected to result in oil price hikes which will be shouldered by the people in the coming months.
Trillions of funds for BBB
To give a new push to the slow implementation of the BBB program, the regime repackaged its infrastructure projects under the PH-Progreso as a strategy to purportedly create new jobs to address the massive unemployment crisis. In line with this recommendation, Duterte’s minion filed the Covid-19 Unemployment Reduction Economic Stimulus (CURES) Bill in Congress.
Through this, the regime will ensure that the P1-trillion funds appropriated for BBB will remain untouched, while allocating an additional P500 billion that will be sourced from loans and funds that will be collected by the Bangko Sentral. The P1.5 trillion fund, which will be disbursed in three stages (P500 billion per year from 2021-2023) will be apportioned by Duterte and his supermajority.
The BBB projects will not create sufficient and long-term employment opportunities. In the past, the much touted program has only contributed one-fourth of the total employment in the construction sector. Corrupt government officials are competing over the implementation of these infrastructure projects as this is where they source their massive kickbacks. Even amid the pandemic and intense hardships experienced by the people, the ruling classes continue to prioritize profiteering to further their self-serving interests.