Road Board abolition in original DOF proposal under tax reform program

The abolition of the allegedly corruption-plagued Road Board and the transfer of its funds sourced from the collection of the Motor Vehicle User Charge (MVUC) to the state’s General Fund to ensure accountability and transparency in their use is already covered by the original proposal of the Department of Finance (DOF) to the Congress under the Duterte administration’s comprehensive tax reform program (CTRP).

Finance Secretary Carlos Dominguez III said making the current and future funds of the Road Board as part of the General Fund will ensure that their appropriation is scrutinized by lawmakers as part of the normal budgeting process.

The reform of the MVUC or Road User’s Tax by adjusting its rates to account for inflation and simplifying it by collapsing the multitude of rates into a single one based on weight is included in Package 1-B of the CTRP.

Complementing these proposed reforms by the DOF is the abolition of the Road Board, which is authorized under Republic Act 8794 to manage and utilize the MVUC funds.

The DOF also specifically proposed to the Congress that the Road Board funds be transferred to the General Fund.

“We want the current and future funds now earmarked for the Road Board to be part of the General Fund which will then be appropriated by the legislature as part of the normal budgeting process and not allocated by an un-elected Board, which lessens the transparency on the use of the funds,” Dominguez said.

Finance Undersecretary Karl Kendrick Chua explained that because both the Senate and the House of Representatives had already approved a bill abolishing the Road Board, the DOF found it unnecessary to include in its Sept. 20, 2018 letter to the Congress a request for its abolition, and detailed instead the remaining tax reform proposals under the CTRP, which it asked lawmakers to approve.

“Both the House and Senate passed the bill on the abolition of the Road Board, which was in response to our proposals as outlined under Package 1-B of the CTRP,” Chua said. “As the Congress already passed this proposal, the DOF`s September 20, 2018 letter to the House leadership requesting it to pass the remaining tax packages expectedly does not include the Road Board abolition. The DOF-proposed restructuring of the motor vehicle user charge does include the transfer of the road fund to the general fund.”

Chua issued the clarification after a congressional leader erroneously pointed out earlier that even the DOF did not want the Road Board abolished because its Sept. 20 letter to the House did not mention this when it formally asked for the restructuring and adjustments in the MVUC as part of its appeal for the approval of Duterte administration’s remaining tax reform packages.

Last Sept. 12, the Senate adopted the House version on the Road Board abolition to dispense with the bicameral conference process. The House, however, rescinded its approval of the bill on third reading on the same day Chua recalled.

On top of reforms in the MVUC, the DOF’s proposed Package 1-B also includes the lifting of bank secrecy laws, the automatic exchange of tax information and the implementation of three types of amnesties (on estate tax, on all unpaid internal revenue taxes with the corresponding waiver of bank secrecy laws before availment, and on delinquencies). Package 1-B, which also covers proposals on other amnesty taxes such as importation taxes and customs duties, has been tackled by Congress via several bills. Some of DOF’s proposals in Package 1-B have made good progress through the legislative process, such as those on the MVUC and Road Board abolition.

The DOF proposal to adjust the MVUC rates to account for inflation, as the fees have been frozen since 2004, and the transfer of the Road fund to the General Fund, remains pending in the House public works committee, while the Senate has yet to file a counterpart measure, Chua said.

“While the transfer of the Road funds to the General Fund will improve the transparency and accountability of its use, it does not add any revenue at all, as the MVUC is also part of the existing revenue base,” Chua said.

He said only adjustment to the MVUC rates will increase revenues earmarked for road repairs, air pollution control and road safety improvements.

Collections of the MVUC are deposited into four special trust accounts established by the National Treasury: the (1) Special Road Support Fund; (2) Special Local Road Fund (3) Special Road Safety Fund and (4) Special Vehicle Pollution Control Fund.

The Land Transportation Office (LTO) is responsible for the collection of the MVUC from all owners of motor vehicles as part of the annual vehicle registration process.