February 7, 2023

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Bills related to the financial sector pass the second reading in the House of Commons

SEVERAL bills related to the country’s financial sector and economy passed the second reading in the House of Representatives. These include the proposed General Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery, dubbed the “Guide Act” by lawmakers, and the Real Property Valuation Reform Bill.

Through an oral vote last Wednesday, lawmakers also approved at second reading the extension of the implementation period of the Agricultural Competitiveness Fund and the proposed Public-Private Partnership (PPP) law.

The “Guide Act” (House Bill 1) aims to help distressed businesses critical to economic recovery through programs and initiatives led by the Land Bank of the Philippines (LBP) Inc. and the Development Bank of the Philippines (DBP) to be implemented financially ). These initiatives aim to address liquidity or solvency problems of MSMEs and strategically important industries, promote their continued operations and maintain employment levels.

The bill expands LBP, DBP, Small Business Corp.’s loan assistance programs, rediscounting and other lending capabilities. (SBC) and Agriculture Credit Policy Council (DA-ACPC).

It also identifies target sectors and intended beneficiaries of various credit facilities as follows: for LBP, actors involved in activities in the agribusiness value chain; and MSMEs eligible for DBP that are active in infrastructure, services, service industries and/or manufacturing businesses.

Tax Incentives

The bill mandates the LBP and the DBP to set up a special holding company (SHC) to revitalize strategically important companies (SICS) that are closed due to significant economic challenges of national or international scope, such as B. in the areas of agriculture, infrastructure, service and manufacturing industries.

HB 1 also grants incentives and exemptions to the LBP, the DBP and the SHC. These include exemption from paying documentary stamp duty, capital gains tax, creditable withholding tax, value added tax, gross receipts tax and other taxes imposed under Republic Act (RA) 8424 or the National Internal Revenue Code of 1997 (as amended). ) for a period of three years.

The bill also grants an exemption from RA 9184 or the Government Procurement Reform Act for mandate-related procurement for a period of three years and: an exemption from RA 10149 (GOCC Governance Act of 2011) and RA 10667 (Philippine Competition Act) for a period of three years for the acquisition of assets of an investment company.

Pursuant to the Proposal, the amount of P10 billion is hereby provided from all actual available funds in the Philippine Treasury that have not been otherwise allocated, as confirmed by the National Treasurer, as additional paid-up capital of DBP and LBP.

Valuation of real estate

The lower chamber also approved in second reading Package 3 of the comprehensive tax reform program, or property valuation reform law, which is a priority measure of the Marcos government.

The proposal aims to improve real estate valuation for the government by adopting a market-based list of market values ​​(SMV) to be used as the basis for local and national real estate taxation.

It also aims to reorganize and strengthen the Office of Municipal Finance (BLGF).

The bill requires that the valuation or appraisal of all property, whether taxable or tax-exempt, be based on prevailing market values ​​in the place where the property is located, in accordance with valuation standards adopted in the proposal.

He mandates the BLGF to lead and manage the implementation of the proposal.

The proposal aims to harmonize the valuation of real estate for tax purposes, which will relieve the Bureau of Internal Revenue from publishing the list of zone values.

The bill also establishes and maintains appraisal standards to regulate the appraisal of real estate in the country. It also offers a comprehensive and up-to-date electronic database of all real estate transactions.

Inefficient, messy

The measure also ensures transparency in real estate transactions to protect the public and build trust in the work of appraisers and appraisers.

Kabayan Assemblyman Ron P. Salo, one of the drafters of the bill, said one of the most touted revenue streams is real estate, which is considered the most important natural resource and financial asset.

Citing the World Bank, Salo said 50 to 75 percent of the country’s wealth is contained in land. Ironically, the real estate market only contributes 6 percent to gross domestic product, lawmakers said.

According to Salo, the property appraisal system in the Philippines represents “a depressing state of chaotic, inefficient and unfair layers of bureaucracy.”

He said at least 23 national government agencies and more than 1,700 local government entities perform or require appraisal functions and services using different systems and methodologies for different purposes, resulting in multiple, confusing, unrealistic or outdated values ​​for the same property.

Extension of the Acef implementation

The lower chamber also passed HB 6524 on second reading, which focuses on the Agricultural Competitiveness Enhancement Fund (ACEF).

The draft law aims to extend the implementation period of ACEF, which is scheduled to expire in December 2022, to 2028 so that the Ministry of Agriculture can continue to use the funds for agricultural sector development activities.

It stipulates that duties levied on imports of agricultural products are included in the minimum access volume mechanism credited to Acef under special account 183 in the General Fund of the Treasury.

The bill also directs affected government agencies to submit relevant documents to the Acef Executive Committee and the Congressional Oversight Committee on Modernization of Agriculture and Fisheries.

It also directs the Audit Committee to conduct a full audit and report on the status of ACEF grants and loans awarded for the period 2016-2021.

House Committee on Agriculture and Food Chair Wilfrido Mark M. Enverga said the extension had strong support and recommendation from the National Economic and Development Agency (NEDA).

The bill aims to amend Section 8 of RA 8178 as amended.

Enverga said the Neda suggested reconsidering this proposed provision, considering that Acef’s remaining balance as of August stands at 4.4 billion pesos.

“We recommend that the Acef Executive Committee improve the disbursement of the fund and justify the additional allocation requested by import-our-quota collections,” Neda’s position paper reads.

Neda’s role

The lower chamber also approved the proposed Public-Private Partnership (PPP) law at second reading to provide an updated legal and policy framework for PPP projects.

The bill aims to increase private sector interest in PPP projects by ensuring a competitive climate through reduced business costs.

The measure provides clearer parameters for government obligations, procedures for project approval, procurement and protest, and tax rules for contingent liabilities.

Under the draft law, national PPP projects costing up to PPP 5 billion must be approved by the PPP Center unless overruled by Neda’s Investment Coordination Committee, and projects over PPP 5 billion must be approved by Neda’s Board of Directors after prior recommendation from the ICC will.

It states that local PPP projects must be approved by local Sanggunians regardless of the project cost, except for projects involving government companies using national government funds, which require PPP Center approval for projects with project costs up to 5 billion ICC-NEDA for projects over P5 billion.

The bill also prohibits the issuance of temporary injunctions (TROS) and injunctions by courts other than the Supreme Court against all PPP projects. The prohibition does not apply where the matter is of extreme urgency and concerns a constitutional issue such that failure to issue a TRO will result in grave injustice and irreparable harm.

Relief of mandates

The bill also provides for the institutionalization of the PPP Center and the PPP Board to fulfill its mandate more efficiently and effectively, respectively as the overarching policy decision-making body for all PPP-related matters.

The measure creates a risk management fund to ensure the sustainability of public finances and improve the ability of the implementing bodies to fulfill their mandates and contractual obligations.

House Committee on Ways and Means Chair Joey Sarte Salceda, one of the bill’s authors, said the proposal aims to free up “trillions” in corporate and private sector funds for infrastructure projects in the country.

The proposed PPP law is included in the priority laws of the Marcos government.

“There is at least 27 trillion pesos of funding available in the banking sector and at least 600 billion pesos annually in the large conglomerates alone for private sector financing of PPPs. We need that in view of the current high level of debt,” said Salceda.

All of these bills are scheduled for a third and final reading next week before the Christmas break of the 19th Congress.