Tax reform, federalism seen clearing Duterte-allied Senate

Metro Manila (CNN Philippines, May 15) — The latest midterm polls fortified the foothold of the Duterte administration in the Senate, which bodes well for the future of reform bills and future budget proposals.

Candidates endorsed by President Rodrigo Duterte have so far dominated the Magic 12 in the partial and official tally of the Commission on Elections following the May 13 polls.

Research firm Fitch Solutions said this has "further consolidated" Duterte's power halfway through his six-year reign, which may smoothen the passage of his pet bills through the legislative mill.

"The strong show of support for Duterte will both give him the confidence and ability to push ahead with his reform programme. The Senate has proved a sticking point for Duterte, as seen by the delay to the passing of the 2019 budget," Fitch Solutions said in a commentary issued after the polls. "Duterte will hope that with increased support in the Senate, his reforms and fiscal plans will face less obstacles."

The Senate locked horns with members of the House of Representatives over alleged last-minute insertions to the ₱3.7-trillion national budget for 2019, which led to a four-month delay before the bill was referred for Duterte's signing into law. This delay pushed back the release of about ₱69.5 billion for state-funded projects and pulled down economic growth to a four-year slump of 5.6 percent during the first quarter.

Eight of the 12 senatorial bets leading the tally were endorsed by Duterte: his former officials Ronald "Bato" dela Rosa, Bong Go, Francis Tolentino; reelectionists Cynthia Villar, Sonny Angara, and Koko Pimentel; Taguig Rep. Pia Cayetano; and Ilocos Norte Governor Imee Marcos. 

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Meanwhile, based on the unofficial tally covering 96.26 percent of election returns, four emerging winners come from other parties: reelectionists Grace Poe and Nancy Binay; as well as actors-turned-lawmakers Lito Lapid and Ramon "Bong" Revilla.

Fitch Solutions said this supermajority could give a much-needed push towards passing key reforms like the shift to a federal form of government, the reinstating of death penalty, and even the reduction of corporate income taxes.

All three cleared the House of Representatives but remain stuck before Senate, with only three weeks of sessions left before sessions adjourn for good. Federalism was among Duterte's campaign promises when he joined the 2016 presidential race.

Robert Dan Roces, chief economist at Security Bank Corp., added that having administration allies sitting as lawmakers could mean greater focus on key economic measures.

"With the credit rating upgrade recently, both chambers will consider expediting passage of those bills that will boost the country's chance for an 'A' rating upgrade," Roces said. "If deemed not political-capital draining to the legislative sponsor, expect a revival of the tax reform program."

The bank economist expects the Senate to prioritize the Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill, the second phase of the tax reform program of the Department of Finance that eyes lower corporate income taxes alongside simpler and shorter tax breaks for businesses.

For Fitch Solutions, having a Senate occupied with allies would lessen short-term political risks, but may erode checks and balances between the two branches of government.

But incumbent senators said they will not be a rubber stamp of Malacañang's wishes.

"The Senate as an institution will always continue to remain independent as proven by our track record in passing legislation. When we see an administration led measure that is good for the people then we support it, but if we see it needs further study and debate then we don’t force it or rush into it," Senate Majority Leader Juan Miguel Zubiri said in a statement.

Meanwhile, opposition Senator Risa Hontiveros said she will continue to push back against "anti-democratic forces" in power.

The National Board on Canvassers has started the official tally for the senatorial race late Tuesday, and expects to proclaim winners starting Monday, May 20.