MANILA, December 13, 2004 (STAR) By Paolo Romero - Unless the Senate can pull off a miracle this week, a special session of Congress is inevitable to ensure the passage of four tax bills needed to avert an economically debilitating credit downgrade for the country.

House Majority Leader Prospero Nograles said the approval today by the Senate of three tax bills already transmitted to it by the House of Representatives would pave the way for a bicameral conference starting tomorrow. This would open the possibility of the bills being ratified by the end of the week.

The three bills pending before the Senate are the "sin tax" bill increasing the excise tax on products like cigarettes and alcohol, the "lateral attrition" or performance and accountability bill for revenue officials, and the bill granting a one-time amnesty for delinquent taxpayers.

The House is expected to pass a fourth bill — the rationalization of fiscal incentives — today.

But Nograles isn’t keeping his hopes up.

"The prospect of a Senate approval of all the tax measures already passed by the House within the week is very dim, considering that we only have five days to go before our Christmas recess," he said.

Nograles said major disagreements among the Senators on certain provision in the tax measures, especially the "sin tax" bill, could hold up approval beyond the date of the scheduled recess.

He said the House leadership is prepared to hold a special session to avoid the possible repercussions of failing to pass the four tax measures before New Year.

"It’s really difficult because traditionally we spend our Christmas break with our constituents to consult with them and find out for ourselves what remains to be done in our districts. However, we also have our commitments to the entire nation, which are far more important than our parochial concerns," he said.

The four tax bills are among the eight revenue measures being pushed by Malacañang to cut the country’s budget deficit.

But the Arroyo administration has agreed to drop one of the measures from consideration.

In response to appeals from telecommunication companies, the administration has agreed not to pursue its plans of imposing a franchise tax on telecommunications.

The Department of Finance (DOF) said over the weekend it was dropping its proposal for the franchise tax in favor of an across-the-board increase in the value-added tax (VAT).

Finance Secretary Juanita Amatong told reporters that the DOF was also dropping its original proposal to impose a two-step increase in the VAT in favor of a 2 percent increase in the VAT

The increase would be on top of the 10 percent already being paid by every individual in the country.

Amatong said the government expects to get at least P30 billion in the first year from this increase in the VAT.

"This would broaden the base of the increase in our taxes," she said.

Amatong said the VAT revenue would complement the P15 billion that would come from the increase in the excise taxes on alcohol and cigarettes and the P25 billion to be saved from the rationalization of tax incentives.

The original proposal of the DOF was to index the excise taxes to inflation.

But Amatong said pushing through with the proposal would have affected the market shares of the two major cigarette companies, Fortune Tobacco and Philip Morris Philippines.

"Political realities would not allow us to do this. So the version now in Congress is the least disruptive," she said.

Amatong said the administration was also looking into areas where the government could cut its losses, particularly in the streamlining of operations.

She said the government was using a foreign grant to finance the rationalization of its appointment system for nominees to government—owned and controlled corporations.

She said the streamlining of government operations was within the statutory powers of the President and did not need an act of Congress to be effected. — With Des Ferriols

Reported by: Sol Jose Vanzi

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