President Rodrigo Duterte did not include his economic assessment and outlook in his State of the Nation Address (SONA) in 2018. Instead, he focused on urging lawmakers to pass key legislation that will help support his administration’s economic agenda.
Primarily, Duterte enjoined Congress to pass the remaining packages of his six-part Comprehensive Tax Reform Program (CTRP), which seeks to update some provisions and correct deficiencies in the country’s tax system to make it “simpler, fairer, and more efficient.”
In 2017, Duterte passed the Tax Reform for Acceleration and Inclusion (TRAIN) law, the CTRP’s first package. The measure, which took effect in January last year, reduced personal income taxes but increased duties on vehicles, fuel, tobacco, and sugar-sweetened beverages. TRAIN revenues are seen to help finance the government’s P8-trillion-plus “Build, Build, Build” infrastructure program.
The rest of the packages, which include lowering corporate income taxes (Package 2), further increasing sin taxes (Package 2 Plus), centralizing property valuation and assessment (Package 3), and simplifying taxation of passive income and financial instruments (Package 4), remain pending in Congress.
TRAIN, however, was widely criticized for contributing to the rise of consumer prices to a nine-year high of 6.7% in September 2018.
The high inflation rate prompted economic managers to fast-track policies meant to help stabilize prices, such as rice liberalization or the removal of quantitative restrictions (QR) on rice imports — another measure Duterte certified as urgent in last year’s SONA.
Aside from the approval of tax reform initiatives and rice liberalization, the President also called on lawmakers to pass the bill establishing the Coconut Farmers’ Trust Fund, envisioned to boost the country’s coconut industry.
VERA Files Fact Check tracks Duterte’s economic promises he made in his 2017 and 2018 SONAs.
PROMISE: Pass Tax Reform Package 2 in 2018
“I hope to sign Package 2 before the year ends. I urge Congress to pass it in a form that satisfies our goals and serves the interests of the many, not just the wealthy few.” (SONA 2018)
“On taxation, my administration will pursue tax reforms toward a simpler and more equitable and more efficient tax system that can foster investment and job creation. We will lower personal and corporate income tax rates and relax the Bank Secrecy Law.” (SONA 2016)
The President was not able to sign the Tax Reform for Attracting Better and High-quality Opportunities (TRABAHO) bill, the second package of the CTRP, because the measure failed to reach the bicameral conference committee in Congress.
The measure aims to lower corporate income taxes and modernize incentives given to businesses, in a bid to attract more investors.
The House of Representatives passed House Bill 8083 or its version of the TRABAHO bill in September last year. However, the bill’s Senate counterpart remained at the Ways and Means Committee level until the 17th Congress adjourned.
Apart from the TRABAHO bill, the House also approved CTRP Packages 3 and 4 on its third and final reading.
On the last session of the 17th Congress, both chambers passed one of the proposals for Package 2 Plus, seeking to increase excise taxes on tobacco. The measure is currently up for Duterte’s signature.
The TRABAHO bill, other CTRP packages, and the proposals seeking higher excise taxes on alcohol and government’s share in miners’ revenues, have yet to be re-filed in the 18th Congress.
PROMISE: Remove quantitative restrictions on rice imports
“We are also working on long-term solutions on top of this agenda to lower the price of rice. We need to switch from the current quota system in importing rice to a tariff system where rice can be imported more freely. This will give us additional resources for our farmers, reduce the price of rice by up to seven pesos per kilo, and lower inflation significantly.” (SONA 2018)
Duterte signed Republic Act (RA) 11203 or the Rice Liberalization Act in February. It amends RA 8178 or the Agricultural Tariffication Act of 1996, replacing the quantitative restrictions (QR) on rice with tariffs.
A QR prohibits a country from importing rice beyond a certain volume; the Philippines, since 2012, has been importing rice only up to a maximum of 805,200 metric tons.
Economic managers expect the rice tariffication law to help secure the country’s food supply and bring down the cost of the staple good as it allows more imported rice to enter the market.
However, some research groups like IBON said the measure would disadvantage local farmers and could adversely affect the local rice industry. State-funded think tank Philippine Institute for Development Studies has estimated rice tariffication would reduce local farmers’ income by 29 percent.
PROMISE: Pass the Coconut Farmers’ Trust Fund
|“Our farmers, especially our coconut farmers, form a significant part of the basic sectors of society. It is from the toil of their hands that we put food on the table. It is my hope that we finally see this through. I urge you, Congress, to convene the [bicameral] conference committee and pass at the soonest possible time the bill establishing the Coconut Farmers’ Trust Fund. I pray that you will do it.” (SONA 2018)|
The Chief Executive vetoed the Coconut Farmers and Industry Development Bill in February, saying it “may be violative of the Constitution and is lacking in vital safeguards to avoid the repetition of painful mistakes committed in the past.”
In his veto message, Duterte said the bill in its current state “does not reflect [the] ultimate goal of accelerating the full utilization of coco levy assets and funds for the benefit of marginalized coconut farmers and the coconut industry,” but did not elaborate further.
Duterte also vetoed its twin bill, a proposal to reconstitute the Philippine Coconut Authority (PCA), because he disagrees with the provision allowing greater farmer representation in the PCA board compared to government representatives.
If signed into law, the Coconut Farmers and Industry Development Bill would have ordered the strengthened PCA to manage the P100 billion in coco levy funds.
The controversial funds were taxes paid by coconut farmers during Martial law, supposedly for their benefit. However, the funds ended up in the hands of Marcos’ cronies, including Eduardo “Danding” Cojuangco, who used the farmers’ taxes to acquire and expand businesses.
In a landmark decision in 2012, the Supreme Court had ruled that these funds must be used only for the benefit of the coconut farmers and for the improvement of the coconut sector.
The Sandiganbanyan affirmed the Supreme Court’s decision last year.
The return of the coco levy funds to farmers was among the President’s campaign promises. He vowed to return them in his first 100 days in office.
On comprehensive tax reform program
- Department of Finance, Comprehensive Tax Reform Program
- Official Gazette, Republic Act 10963
- Inquirer.net, Understanding the ‘Build, Build, Build’ program, July 28, 2018
- Forbes.com, Duterte’s Ambitious ‘Build, Build, Build’ Project To Transform The Philippines Could Become His Legacy, Feb. 28, 2018
- Philippine Statistics Authority, Summary Inflation Report Consumer Price Index (2012=100): September 2018
- Philstar.com, Inflation soars to new 9-year high of 6.7% in September, Oct. 5, 2018
- Department of Finance, DOF submits CTRP Package 2 to Congress, Jan. 16, 2018
- House of Representatives, House Bill No. 8083
- Philippine Senate, Senate Bill No. 1906
- Philippine Senate, Senate Bill No. 2233
- Department of Finance, DOF thanks Congress for approving ‘sin’ tax reform bill, June 5, 2019
- CNN Philippines, Dominguez ‘very confident’ 18th Congress will approve more tax reform bills, July 1, 2019
- BusinessWorld, Dominguez calls anew for passage of tax reform packages, March 29, 2019
On rice tariffication
- Official Gazette, Republic Act 11203
- Official Gazette, Republic Act 8178
- National Economic and Development Authority, Rice Tariffication a Win for Farmers and the Poor – NEDA, Feb. 28, 2019
- Philippine Senate, Rice Tariffication: Why is it a necessary public policy?
- Ibon Foundation, Rice tariffication to impoverish Filipino farmers more, Congress warned, August 4, 2018
- Philippine Institute for Development Studies, Tariffication not Answer to Rice Supply, Price Ills, Sept. 1, 2018
On Coconut Farmers’ Trust Fund
- GMA News, Duterte vetoes coco levy bill providing P100-B trust fund for farmers, Feb. 15, 2019
- CNN Philippines, Duterte vetoes Coconut Farmers and Trust Fund bill – Medialdea, Feb. 15, 2019
- Inquirer.net, Duterte vetoes coco levy fund bill, Feb. 15, 2019
- @PiaRanada, “LOOK: #PresidentDuterte explains why he vetoed Cocunut Farmers and Industry Development Act. @rapplerdotcom,” Feb. 17, 2019
- ABS-CBN News, Duterte vetoes bill strengthening PCA, Feb. 9, 2019
- Philstar.com, Duterte vetoes bill strengthening Philippine Coconut Authority over corruption worries, Feb. 10, 2019
- Business Mirror, Warning of corruption risks, Duterte vetoes bill reconstituting PCA, Feb. 8, 2019
- Rappler.com, The politics of the coco levy scam: From Marcos to Noynoy Aquino, Jan. 22 2017
- Supreme Court of the Philippines, G.R. Nos. 177857-58
- Sandiganbayan, People vs Cojuangco, Jr, et al
- CNN Philippines, Duterte promises farmers: I will return coco levy fund, March 30, 2016
- Rappler.com, Duterte, Cayetano vow ‘return’ of coco levy fund in 1st 100 days, March 31, 2016
- Inquirer.net, Coco farmers ask Duterte to fulfill his promise, Nov. 7, 2016
(Guided by the code of principles of the International Fact-Checking Network at Poynter, VERA Files tracks the false claims, flip-flops, misleading statements of public officials and figures, and debunks them with factual evidence. Find out more about this initiative and our methodology.)