JPEPA to cost gov't P16.1 billion
in waived import tax revenues -- Honasan

The Japan-Philippines Economic Partnership Agreement (JPEPA) is projected to cost the national government P16.1 billion in forgone import tax revenues in the next few years, and a senator wants to find out whether the promised economic gains from the deal would more than offset the losses.

Citing estimates by the Tariff Commission (TC), Sen. Gregorio Honasan said the government would waive some P18.89-billion in import tax revenues on Japanese goods until 2010. Of this amount, P4.15 billion would be given up on the JPEPA's first year of implementation.

The projections were based on an exchange rate of $1 to P55. Adjusted to the prevailing rate of $1 to P46.85, the import tax income loss is expected to reach P16.1 billion, of which P3.85 billion would be lost in accord's first year of execution.

"If the government will lose this much money, then we better make sure we can quickly recoup the losses with real economic benefits -- increased export sales to Japan and more jobs in our export-oriented industries -- that are hopefully worth much more," Honasan said.

"Because unlike the anticipated economic gains that are difficult to quantify, the import tax revenue losses are definite, once duties on Japanese goods coming into the country are eliminated or reduced," he pointed out.

Honasan said P16.1 billion in forgone tax income is a large sum by any measure, considering that the government is still struggling to achieve a balanced budget.

To illustrate, the senator said the amount is more than enough to totally wipe out the public school system's classroom shortage. He said the P16.1 billion would be sufficient to cover the construction of 35,000 to 71,000 classrooms, depending on who would build them.

The government has pegged at 41,197 the total "unfunded" classroom backlog nationwide, at 45 students per classroom. The education department spends P450,000 to build a single classroom -- double what it costs the Federation of Filipino-Chinese Chambers of Commerce and Industry Inc. to put up the same structure.

"We are not anti-liberalization. We support liberalization, provided we have adequate safety nets for domestic industries and workers that may be impacted by the freer entry of Japanese imports," Honasan stressed.

The senator also wants to find out whether the waived tax income had been factored into the government's revenue collection targets going forward.

"Assuming the Senate ratifies the JPEPA this year, have the forgone revenues been factored into the 2008 Budget of Expenditures and Sources of Financing as well as the Bureau of Customs' projected collections next year?" Honasan asked.

Honasan said the Senate ways and means committee should audit and validate the TC's projections ahead of the chamber's hearings on the JPEPA.

The TC's calculations were based on the value of Japanese goods imported by the Philippines in 2005, which may have already increased by now, the senator said.

In 2005, the Philippines imported $6.7-billion worth of goods from Japan, and collected duties on 62 percent of the value. Under the JPEPA, about 54 percent of the country's total dutiable imports from Japan would have their duties immediately eliminated, according to the TC.