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Illustration by Francis Busok IBON@2017

Sonny Africa

Among Pres. Rodrigo Duterte’s idiosyncrasies is preferring a vulgar stream-of-consciousness approach in his speeches. This is even for the annual state of the nation address (SONA) at the opening of Congress which is undoubtedly the government’s highest-profile policy speech of the year. The president’s choice is a matter of style but then this also means that his SONAs shouldn’t be analyzed the way other presidents’ SONAs are – that is, as a coherent comprehensive statement of the administration’s policies and priorities.

Having said that, Pres. Duterte’s 2017 SONA can still be interpreted against everything else he has been doing in the past year. What becomes clear is that he continues to build his image and behave as a benevolent paternalistic strongman.

This is dangerous, anti-democratic, and anti-development especially in the specific conditions of the country. The Philippines’ political institutions are underdeveloped with a strong patronage-clientelist streak. The military and police are abusive and violate human rights with impunity. Oligarchic and business elites abuse their economic power with the backing of the government.

Authoritarianism was unfortunately prominent in the president’s SONA and in his press conference afterwards. He played up the need for a forceful – even militarist – approach to dealing with the country’s problems.

The president repeatedly highlighted the importance of the military and police and strengthening them with tens of thousands of additional troops and hardware. He took a combative stance against millions of Filipinos – “anarchic” Leftists occupying the streets, the National Democratic Front of the Philippines (NDFP), Lumad schools, Moro who will “side [against] government”, and poor alleged drug users and pushers. He defended martial law as an expedient way to deal with peace and order problems, never mind that this is excessive and unnecessary. And he again pitched for the death penalty for “deterrence” as well as “retribution”.

The president also trivialized human rights and due process. These were portrayed as a hindrance to tackling the menace of illegal drugs, criminality and corruption. The military and police were also assured of impunity with the president declaring: “I have your backs.” And yet these are such basic liberal democratic values.

The president, in discussing his tax reform program, was appreciative of a sycophant Congress yet threatening to those uncooperative. He commended the 246 members of the House of Representatives (HOR) who supported his anti-poor and pro-rich tax reform bill. But, with the measure now in the hands of the Senate, he also threatened the chair of the Senate Ways and Means Committee for being critical especially of the tax program’s anti-poor aspects.

The president’s SONA had precious few fragments of reforms. The most prominent was prioritizing the environment over mining and other destructive activities. Also potentially important was the exhortation to set up mineral processing and manufacturing industries in the country, notwithstanding ambiguity if these would be genuinely Filipino or just foreign firms setting up shop in the country. The budget for assistance to overseas Filipino workers was doubled to over Php1 billion. He also dramatically told the sick to go to any hospital and just say that the president would take care of their expenses.

And yet the 2017 SONA was actually dismissive of the serious socioeconomic problems the country is facing. There was no acknowledgement that the economy actually shed almost 400,000 jobs in the first year of the Duterte administration and that poverty remains deep and widespread among tens of millions of Filipinos. There was no sign that the president grasped how neoliberal Arroyonomics and Aquinomics resulted in rapid growth, profits and wealth for a few amid poverty and joblessness for the many.

There was, if anything, oversimplification to bolster the drive to authoritarianism: “The economy surges when there is peace and order.”

This is blind to the long-standing and deep structural inequities that keep the economy underdeveloped. Landlords and rural elites take the greatest part of what landless peasants and farmworkers produce. Capitalists exploit workers through low wages and scant benefits, and charge consumers the highest prices they can. Domestic agriculture and industry are stifled to preserve foreign capital’s markets and sources of raw materials.

Indeed, the talk of “investor confidence” and “protecting local and foreign investors” is a virtual defense of these inequities. A declaration to uphold a bias for the disenfranchised and propertyless poor in the economic sphere would have been much more welcome. The impression instead is of growing authoritarianism as the political framework to press the neoliberal economic agenda against growing protest and opposition.

These are alarming developments in the state of the nation. The tens of thousands of rallyists outside the Batasan complex and many thousands more across the country are however vivid expression of people asserting their social and economic rights. The administration would do well to heed their grievances and demands. They are the real forces of change that, looking beyond particular administrations, play the long game of bringing the nation forward to a democratic and developed future for the people.—IBON Features

From Philtizen.com

The 2017 State of the Nation Address was dismissive of the Philippines’ serious socioeconomic problems especially joblessness, poverty and inequities, research group IBON said. The President even tended to oversimplify the economic situation to justify authoritarianism, said the group.

President Duterte delivered Monday his second State of the Nation Address to the country’s senators and congressmen. According to IBON’s executive director Sonny Africa, “There was no acknowledgement that the economy actually shed almost 400,000 jobs since last year and that poverty remains deep and widespread among tens of millions of Filipinos.” Africa added that there was no sign that the current administration grasped how neoliberal policies implemented by its predecessors have resulted in rapid growth, profits and wealth for a few amid poverty and joblessness for the many.

According to Africa, the President’s speech ignores the long-standing deep structural inequities that keep the economy underdeveloped. “Landlords and rural elites take the most of landless peasants and farm workers’ produce; capitalists exploit workers through low wages and scant benefits, and charge consumers monopolistic prices; and domestic agriculture and industry are stifled to preserve foreign big business’ markets and sources of raw materials,” explained Africa. He also said that the President’s discussion of investor confidence and protecting local and foreign investors even defends these inequities.

Africa said that the President’s statement that the economy surges when there is peace and order is an oversimplification to bolster the drive to dictatorial rule. “A declaration to uphold the bias for the marginalized and poor in the economic sphere would have been much welcome,” Africa said, “but instead the impression is of growing authoritarianism as the political framework to push the neoliberal economic agenda against growing protest and opposition.”

“These are alarming developments in the state of the nation,” said Africa. “The administration would do well to heed the grievances and demands of the people who are constantly asserting their social and economic rights”, Africa concluded.

 

#CASERGoalsIcons

#PeoplesSONA2017 / Research group IBON said that the interruption of peace talks between the government and the NDFP also interrupts important discussions on economic reforms. The group said this in the aftermath of the announcement of Jesus Dureza, Presidential Adviser on the Peace Process, that the back-channel talks with the National Democratic Front of the Philippines are being cancelled because due to the absence of the “desired enabling environment for the conduct of the peace negotiations”.

“The majority of Filipinos are poor and face social and economic turmoil daily,” said IBON executive director Sonny Africa.

As a socio-economic research institution, IBON launched a campaign to promote social and economic reforms with or without the peace negotiations. An agreement on social and economic reforms is supposed to be a current substantive agenda of the talks.

“The comprehensive agreement on social and economic reforms (CASER) being negotiated will benefit millions of Filipinos, and IBON is concerned that this risks being lost with yet another collapse of peace talks,” concluded Africa.

A man sleeps amidst rubbish under a bridge in Paranaque city, Metro Manila, Philippines May 31, 2016. REUTERS/Ezra Acayan

During the Duterte administration’s first year, there was all the hype about aiming for inclusiveness and championing the common Filipino family’s dream for a comfortable life. The President took important, some unprecedented steps including hinting nationalism, willingness to work with progressives in the cabinet and pursuit of peace negotiations. Yet the administration capitalized on bloody wars on drugs and other forces perceived to be enemies of the State, barely changed the way the economy was run and saw the nation deteriorating further.

The following are highlights of the Duterte administration’s economic direction: the context of deterioration amid growth, a short-sighted development plan, and continued implementation of discredited economic policies.

  1. Deterioration amid growth

The Duterte administration’s continued adherence to the neoliberal frame has not changed and can only worsen joblessness, poverty, inequality and decline that persisted despite high reported growth.

The Philippines was hailed as the second fastest growing economy in Asia and 10th fastest in the world. Growth in gross domestic product (GDP) at an average of 6.7% from 2012-2016, the highest in seven decades.

Yet production comprising agriculture, manufacturing, construction and mining, which steadily fell over decades of neoliberal policies, shrunk to a low 39.2% of the economy in 2016. In three decades the annual average of the combined share of agriculture and manufacturing in GDP  fell to just 32% in 2016 from 54% in the ‘50s to ‘70s. The share of agriculture in GDP dropped to 8.4% in April 2017.

IBON estimates unemployment, which averaged 5.1% in the 70’s, to be at an annual average of some 10.2% in the period 2010-2016. The official definition of ‘unemployment’ has removed millions of discouraged jobless Filipinos from the labor force. Underemployment remains on a high annual average of 18.9% from 2010-2016. The number of employed Filipinos dropped by 393,000 in April 2017. Meanwhile an average of 5,771 Filipinos left the country daily in 2016 to work abroad.

There was a concentration of economic activity in corporations, and income and wealth in a few individuals while transnational companies (TNCs) have disproportionate control of the economy.. The gross revenue of just the top 100 corporations, for instance, increased from being equivalent to 59% of GDP in 2010 to 71% in 2015. TNCs accounted for 37% of Top 1000 revenues and 63% of manufacturing by 2015. The net worth of just the 40 richest Filipinos grew from being equivalent to 14% of GDP in 2010 to 26% in 2016.

On the other hand, IBON estimates at least 56 million Filipinos as poor with a poverty line of around Php100 per person per day. These include 21.9 million Filipinos officially counted as poor by a very low poverty line of Php60 per person per day.

For the employed, wages remained insufficient for decent living. The highest mandated minimum of the NCR of P491 is only 43% of IBON-estimated family living wage at P1,130 for a family of six in June 2017.

Contractualization which is also a condition of wage repression is worsening despite government hype that it is being curbed. According to latest data available, IBON estimates that one in three rank and file workers are non-regular.

  1. Pro-business, short-sighted Dutertenomics

The Duterte administration’s Philippine Development Plan 2017-2022 is its economic blueprint for the economy which relies on external sources instead of building and strengthening the economy towards self-reliance. Its programs, which include an infrastructure boom, will benefit big business and foreign investors but not the poor majority who need social and economic  infrastructure the most.

For instance, its grand Build! Build! Build! Infrastructure program will only be a short-term stimulus to economic growth because the transport and other infrastructure proposed does not develop domestic agriculture and Filipino industry on a nationwide scale. It is a short-sighted effort that will not result in broad-based economic growth, social progress, and national development. Past administrations such as the Marcos and Aquino regimes were biased towards a similar infrastructure-heavy approach. Yet the economy remains underdeveloped; agriculture and industry backward; and the majority still poor.

The ‘Build! Build! Build!’ infrastructure program of over 4,000 projects with 75 big-ticket flagships covers big-ticket infrastructure: mass transit, roads and bridges, railways, airports, seaports, flood control, communication and information, and so-called ‘new cities’. Fifty-three of these have identified budgets cumulatively worth Php1.58 trillion but is overwhelmingly concentrated in NCR, CL and ST which account for 63.5% of the total value.

Such infrastructure program strengthens prevailing enterprises engaged in neocolonial trade especially in NCR, CL and ST. The main beneficiaries would be existing big foreign and domestic corporations in low value-added manufacturing for export, natural resource extraction, and services including selling of imported products. Commuters may benefit but rates may hinder the access of low and no-income users. The planned infrastructure does not benefit farmers in terms of more productivity, irrigation, post-harvest facilities and farm-to-market roads. Poor communities may even stand to be displaced by large infrastructure projects.

The true financial cost of the infrastructure whether under the public-private partnership (PPP) scheme or its hybrid variant also has to be put under scrutiny. Project financing is one aspect – coming from government funds, ODA (bilateral and multilateral), private capital – and the eventual rates or fees charged to the public are also relevant. The persistently regressive taxation bolstered by government’s tax reform package will also figure in exacting amounts from millions of poor Filipinos through additional value added, oil and sweetend beverages taxes to fund Build! Build! Build!.

  1. “Economy not broken”– business-biased framework upheld

The Duterte government’s economic direction built on instead of changed the failed neoliberal or business-biased framework of the past administrations.

In many words, President Duterte promised the nation a break from the woes of the past, yet saw the economy as something that was not broken and did not need fixing. He instructed his cabinet not to change existing rules and laws and to honor existing agreements between government and its foreign counterparts. The President affirmed neoliberal policies and appointed avid defenders of this market-oriented framework as his economic managers in the budget, finance, and economic planning departments—that are most decisive in running the economy.

Instead of taking nationalist and democratic measures and pushing real reforms in agriculture, social welfare, labor and education, the administration upheld measures favorable to foreign capital and domestic ruling elites. Thus trade and investment liberalization, which benefits advanced nations, continues to take its toll on the country’s resources, production sectors and the nation’s sovereignty. Public services and infrastructure development continue to be privatized for profit at the expense of the public. Removal of State regulation in various industries continues to be institutionalized to favour big businesses over consumers.

It is not too late for any government to shift gear and pursue measures that have been proven beneficial to the people in other countries’ experiences. Landlords, bureaucrats, big business and even foreign powers will expectedly oppose these. But real agrarian reform, rural development and building Filipino industries is crucial to strengthen the economy, raise incomes, create stable jobs, and provide sufficient education, health, housing, and public utilities.

From How Travel

#PeoplesSona2017/ Research group IBON attributed Metro Rail Transit Line 3’s (MRT3) more frequent breakdowns to the privatization of the rail transport. The group reminded government that passing on to corporations the State’s role to provide the people with a rail transport system, as with other basic utilities, has by experience been at the expense of the public.

The group commented on the Commission on Audit’s (CoA) annual report on the Department of Transportation (DoTr) citing an increased occurrence of glitches in the MRT3 last year. South Korean Busan Transportation Corporation took over the maintenance of the rail service in January 2016 under a four-year Php3.81-billion contract following private corporations that have all failed to maintain the line.

More than half a million of daily MRT3 commuters have had to live with the increasing incidence of rail disturbances, said IBON. The CoA observed that during the first year of the contract, passenger unloading, train pullout operations and service interruptions have increased by 164%, 20% and 26%, respectively. Busan has also been found to have lagged in the overhauling of light rail vehicles at 1/13 for the entire year of 2016. Worse, all 48 of the new coaches worth Php3.76-billion remain inoperational.

IBON added that the public continues to bear the cost of a privatized MRT3. Under a 25-year Build Lease Transfer (BLT) contract with the Sobrepeña and Manuel V Pangilinan group-owned MRT Corp. (Metro Rail), the DoTr, for instance, continues to pay rental fees that include equity rental payment guaranteeing an annual 15% return of investment and payment of Metro Rail’s US$485.5-debt to the project’s financiers.  Meanwhile, under the concession agreement, commuters are bound to suffer periodically increasing fares, of which 85% goes to servicing principal and interest payments. The MRT deal has catered to private gain from the very beginning, IBON said.

The problematic Busan case points out government’s duty to take charge of the vital transport and to ensure that the public can access, utilize and afford it, IBON said. Involvement of any profit-seeking business entity in a government program, whether it be in the form of hybrid public private partnerships (PPPs), old-style PPPs, unsolicited proposals or official development assistance-funded projects, warrants tight public scrutiny, said the group.

From Planet Philippines

Transformative education advocates belonging to the Educators Forum for Development (EFD) expressed concern about the Department of Education’s (DepEd) latest Contemporary Issues curriculum revision. The measure effectively removes topics pertinent to students’ grasp of and attitude towards issues that have been afflicting Philippine society until now, the group said.

The DepEd released an April 21, 2017 revised curriculum draft in Araling Panlipunan Grade 10, in which the lessons were rearranged from the previous May 2016 curriculum guide. Deleted were the following topics: political dynasties, graft and corruption and territorial conflicts (i.e. South China Sea/West Philippine Sea issue).

The teachers’ network said that the Contemporary Issues subject is expected to build on basic education principles in which Filipino students are molded into socially-aware and responsible young citizens and members of their families and communities.

But the latest revision, said EFD, ignores how Philippine economics and politics are affected today by non-democratic and unjust practices that only a democratically active citizenry can address. The group remembered how the Marcos dictatorship in which political dynasties and graft and corruption thrived was toppled by a conscientized people’s concerted action.

The deleted topics could otherwise be building blocks in the consciousness of the young for them to not allow a repeat of Filipinos’ collective suffering under the Marcos regime. Discussing the prevailing dominance of a few clans in running the affairs of the country down to the barangays, for instance, especially with a localized K-to-12, is crucial in inculcating the value of good governance and genuine people’s representation. So is familiarity with patronage politics and government officials’ practice of stealing from the nation’s coffers or keeping the pork barrel, which has suffered public services especially education, health and housing, and narrowed resources that the people should directly benefit from.

Meanwhile, Philippine experience with regard to territorial dispute specifically concerning China has brought the nation to contemplate on matters of resource grabbing, international protocols, geopolitics and ultimately self-determination.

The EFD stressed that it is within the role of education to raise the youth’s awareness of issues like these rather than make them oblivious to such as could be a result of the curriculum revision. Education should be able to create a nation’s active champions of democracy and sovereignty, not of ignorance, passivity and submission. Only the few perpetrators and beneficiaries of political dynasties, graft and corruption and territorial conflicts stand to benefit from the curriculum change, said the group.

The EFD has long criticized the K-to-12 curriculum as aggressively shaping Philippine education to fit the demands of globalization. The group said that by not exposing social realities and exploring related alternatives, the Philippine educational system distances teachers and learners from helping in social transformation and becoming harbingers of genuine economic development and good governance.

The network urged fellow educators to remain vigilant in addressing the impact of curriculum changes, and step up efforts to highlight nationalist and pro-people content in teaching Social Studies and other subjects.

From the Philippine Information Agency

Research group IBON said that the trade department’s order to give the private sector the free rein in determining the price of basic goods will harm consumers especially the poor majority. This is a form of deregulation whereby the government reneges on its responsibility to regulate the price of  basic goods and protect consumers, the group said.

The Department of Trade and Industry (DTI) drafted an order allowing manufacturers to determine the prices of goods without government having to approve the Suggested Retail Price (SRP). This will supposedly encourage competition so that firms are compelled to lower their rates to the advantage of consumers.

Instead of encouraging competition, however, price deregulation is wont to push prices upward, said IBON. Competition presumes a large number of producers – and not just a handful, or a monopoly – competing in terms of price and quality to provide consumers’ needs.  In the case of the country’s deregulated electricity and power industry, for instance, the few players in power generation, production and distribution are able to dictate the rates.

The group said that if the same happens to basic goods, the DTI directive will be detrimental to many poor Filipinos, of whom, based on official data, 21.9 million in extreme poverty live on or below Php61 per day and 65 million live on only Php125 or less per day.

According to IBON, the profit-seeking nature of the private sector contradicts the State’s duty to protect consumers in terms of ensuring the affordability of basic goods. Government should uphold its regulatory function and ensure people’s access to basic goods in accordance with the Price Act, which further states that “it is the policy of the State to ensure the availability of basic necessities and prime commodities at reasonable prices at all times” and to protect consumers from various sales malpractices, such as price manipulation.

IBON also cited the 1987 Constitution and Republic Act 7394 or the Consumer Act  of the Philippines that guarantee related consumer rights stating that “The State shall protect consumers from trade malpractices…” and that the State shall ”protect the interests of the consumer, promote his general welfare and likewise establish fair standards of conduct for business and industry”, respectively.

Photo from villacortaaccounting.com

By Sonny Africa

IBON FEATURES — The Tax Reform for Acceleration and Inclusion Act (TRAIN), the first part of the Duterte administration’s Comprehensive Tax Reform Program (CTRP), has hurdled the House of Representatives (HOR) and is up for deliberations at the Senate. The Department of Finance (DOF) targets approval of TRAIN, or House Bill No. 5636, soon after sessions resume in late July.

The DOF’s tax reform proposals include: higher consumption taxes from removing VAT exemptions (though retaining those for senior citizens and persons with disabilities) and new excise taxes on petroleum products, sugar-sweetened beverages, and automobiles; and lower income and wealth taxes from reduced personal income tax rates (PIT, indexed to inflation) and a lower flat 6% rate for estate and donor’s taxes.

Pres. Rodrigo Duterte certified TRAIN as urgent and his main economic managers – the finance, budget and economic planning secretaries – have been aggressively pushing it since last year. The bill is also supported by a wide range of other high-income earners spanning the 246 HOR lawmakers voting in favour of it, former finance secretaries and heads of the National  Economic and Development Authority (NEDA), economists, business tycoons, big business groups, foreign chambers of commerce in the country, financial institutions like Deutsche Bank and Nomura, and others.

The government and the wealthy private sector constantly invoke national development and the welfare of the poor to justify their position. Yet the conspicuous lack of similar clamor on the part of the country’s poor majority is not surprising – the DOF’s TRAIN is grossly anti-poor, brazenly pro-rich, and should be derailed.

These are the DOF’s five (5) biggest tax reform lies:

1) “We will lessen the overall tax burden of the poor” and “increase the take-home pay of most individuals thereby putting more money in people’s pockets” where “99% of taxpayers will pay less taxes” – The truth: the tax reform will make the poor poorer.

The net impact of the change in income taxes, expansion of VAT coverage, new oil excise taxes, and inflationary effect is that the poorest 60% of Filipino households, or 13.7 million households with some 60 million Filipinos, will have less money in their pockets after the tax reform.

The government will in effect take away Php737 annually from the pockets of the poorest 2.3 million families with an average monthly household income of just Php5,214 in 2018 (first and lowest income decile), Php980 from the next poorest 2.3 million families with monthly income of Php8,315 (second income decile), Php1,163 from the next poorest 2.3 million families with monthly income of Php10,691 (third income decile), Php1,374 from the next poorest 2.3 million families with monthly income of Php13,015 (fourth income decile), Php1,687 from the next poorest 2.3 million families with monthly income of Php15,746 (fifth income decile), and Php2,088 from the next poorest 2.3 million families with monthly income of Php19,269 (sixth income decile).

The poorest 60 million Filipinos will pay more taxes under the proposed tax package with higher prices on food, drinks, LPG, transport fares, electricity, housing and other basic goods and services they consume. It will in effect take away Php737 from every rice farmer, Php980 from every farm worker, Php1,163 from every construction worker, Php1,374 from every private school teacher, Php1,687 from every bookkeeper, and Php2,088 from every machine tool operator. The figures from a DOF table supposedly computing the change in annual take-home pay in 2018 are however likely even underestimated. For instance, the DOF has also estimated that the oil excise tax alone will increase a fisherman’s fuel expenses by Php1,089 and of a farmer’s by Php1,210 with the VAT and inflationary impact even coming on top of these.

The income tax exemption for minimum wage earners, personal and additional exemptions, and health insurance premium payments are also proposed to be lifted. While minimum wage earners will still not pay taxes for now – because income tax starts to be paid upon reaching an annual income of Php250,000 a year – it is possible that they will be subject to income taxes in the future if the minimum wage reaches the first taxable income tax bracket.

2) “After the tax-transfer reform, the poor benefits the most” and “the tax system will be fairer and more equitable” – The truth: the tax reform will make the rich richer.

The net impact of the change in income taxes, expansion of VAT coverage, new oil excise taxes, and inflationary effect is that the highest-earning 40% of Filipino households, or 9.1 million households with some 40 million Filipinos, will have more money in their pockets after the tax reform. This includes among the richest households in the country.

The 2.3 million families with an average monthly household income of Php24,355 (seventh income decile) will gain an additional Php4,187 annually, the next 2.3 million families with monthly income of Php32,295 (eighth income decile) will gain an additional Php8,012, the next 2.3 million families with monthly income of Php47,131 (ninth income decile) will gain an additional Php16,954, and the richest 2.3 million families with monthly income of Php111,380 (tenth and highest income decile) will gain an additional Php43,540. They have net gains because their increased take home pay from lower personal income taxes more than offsets losses from additional VAT, oil taxes, and inflation. The net gains also remain even if higher taxes on automobiles and especially on high-end luxury cars, which is sensible, are factored in.

Middle class households in the seventh to ninth income deciles certainly deserve relief from changing decades-old tax brackets. These include Filipino families whose only moderate incomes are doubly-eroded by inflation and by excessively high taxes. It can even be argued that the minimum figure for tax exemptions can be raised to those earning up to around Php33,000 monthly.

However it does not make sense for supposed tax reforms to give a corporate executive already earning Php280,309 monthly (or Php3.4 million yearly) an additional Php91,027 or a company’s chief executive officer already earning Php598,132 monthly (or Php7.2 million yearly) an additional Php130,267. Yet the DOF’s TRAIN does just that while, to recall, taking hundreds of pesos away from the poorest Filipinos who already have so little as it is. The poorest are made to pay more out of much smaller incomes to begin with and this is not by any reasonable interpretation a “fairer and more equitable” tax system.

The DOF cites the supposedly higher income tax rate of 35% applied to the highest income bracket, compared to the current 32%, as proof of the progressivity of their proposals. This is a half-truth though because using the complete formula which includes a minimum lump sum and applying the tax rate only on the excess of income over Php5 million means that many of the country’s rich will actually end up paying less than under the current tax system.

The DOF also gives the example of the country’s top two income taxpayers whose take home pay falls in 2018 upon the tax reform to reinforce the impression that the new tax system is progressive. This is however an exaggeration and is oblivious to how the country’s super-rich use various legal and illegal strategies to avoid paying taxes including tax havens, off-shore accounts, shell companies and trust funds, smuggling and others.

The tax reform program really does nothing to address, and actually worsens, the continuing accumulation of massive wealth in the hands of a few. The country’s richest for instance also gain additional benefit from the lowering of estate and donor’s taxes to a flat rate of 6%, with the DOF estimating that they will pay at least Php3.1 billion less per year starting 2018.

3) “We are committed to uplift the poor and the vulnerable through a progressive social protection using targeted cash transfers and public transport subsidies” – The truth: TRAIN’s taxes are permanent but its social protection is only temporary and, worse, still just an undefined afterthought.

The only reason the DOF can argue that the poor benefit is because TRAIN supposedly has a social protection component. Early proposals included a targeted cash transfer of Php300 per month to the poorest 50% or some 10 million households in the country to mitigate rising prices and a Pantawid Pasada scheme of cash cards for public utility vehicles to offset the impact of the increase in oil excise taxes especially on diesel.

The TRAIN bill passed by the HOR however remains extremely vague on these supposed social protection measures. Out of the 59-page bill, there is only a third (1/3) of a page on them with just cursory mention of a “social benefits program” and “granting fuel vouchers to qualified transport franchise holders”.

The only clarity given is that the measures will last for just three years. This means that even assuming that they are implemented, the measures are only temporary and the majority poor of the country will be struggling with the onerous tax burden of TRAIN long after the social protection measures have ended. This gives credence to the notion that they are only being implemented to divert from the gross regressiveness of the new tax package. Such a smokescreen also comes at a price and the administrative cost of the scheme will run into at least hundreds of millions of pesos and perhaps even into the billions.

4) “If no or diluted tax reform, the outcome will be poverty, malnutrition and traffic” and “the poor will likely remain poor” – The truth: the DOF is blackmailing the poor because it is afraid to tax the rich.

The threat of poverty, malnutrition and indeed the traffic oddly mentioned in the same breath is directed at the country’s poor farmers, workers, informal sector, low-paid employees and others who already suffer these the worst. It is certainly true that the government needs resources for the many different things needed to ensure social and economic development for the majority. Schools, hospitals and homes have to be built, roads, bridges, water systems and power plants have to be constructed, factories and farms have to be developed, and the economy has to be strengthened.

The DOF is however disingenuous in putting the burden of providing these resources on the majority of Filipinos who have such low incomes and barely any assets to begin with, rather than on the few elite families and corporations who not only have such high incomes but have also amassed huge wealth from the economy over decades. Poorer families earning just a few thousand pesos a month with barely any savings and scant assets cannot be treated the same way as the richest families earning hundreds of thousands (or even millions) of pesos a month with hundreds of millions (or even billions) in savings and assets.

The extreme concentration of wealth in a few in the country is an opportunity for real tax reforms that do not just raise revenues for development but also reduce inequality. Today, some 16 million Filipino families (70% of all families) earn at most around Php21,600 a month; the poorest half (50%) try to live off less than Php15,200 a month and the poorest fifth (20%) on an average of less than around Php9,500 a month. These poor and low income families should be taxed as lightly as possible while being given as much publicly-provided social and economic services as they need.

On the other hand, the richest 156,000 or 0.7% of families had a cumulative income of Php356.9 billion in 2012 with an average annual income of Php2.3 million – taxing just an additional 20% of this income can raise Php71 billion. The next richest 170,000 or 0.8% of families had a cumulative income of Php198.4 billion with an average annual income of Php1.3 million – taxing just an additional 10% of this income can raise Php20 billion. So raising income taxes on just the richest 1.5% of Filipino families can already raise some Php91 billion.

While the DOF often mentions “shared responsibility,” its tax reforms are conspicuously silent on taxing the super-rich’s massive wealth. For instance, there are reportedly at least 690 “ultra high net worth” Filipinos with at least Php1.4 billion in assets each. This includes the country’s 50 richest oligarchs who have a combined net worth of US$79.5 billion or Php3.8 trillion at current exchange rates and 14 of whom recently landed on Forbes’ World Billionaires list.

The DOF is correct in pointing out “dire consequences [on] the lives of the poor and vulnerable” from “[losing] classrooms, teachers, rural health units, barangay health stations, provincial hospitals, paved roads, bridges and irrigated land”. For the sake of argument it can also be granted that greater infrastructure spending will increase economic activity and output at least in the short-term. It should however not look to the poor for the resources to finance these but to the rich, especially the super-rich, who have already benefited so much from the economy, from its infrastructure, and indeed from the labors of the poor themselves.

5) “Tax Reform for Acceleration and Inclusion” – The truth: TRAIN deforms the tax system to become even more anti-poor and pro-rich.

To “reform” is to make something better but, for all the reasons mentioned above, the DOF is not reforming the tax system. The tax proposals are even exclusionary in disproportionately burdening the poor while relieving the rich. To call the proposals “Tax Reform for Acceleration and Inclusion” is then the biggest lie of them all.

The Duterte administration’s tax reform program starkly reflects the country’s class divide and is neoliberalism in full play. The upper classes and foreign capital are clamoring to pay lower taxes and to have their infrastructure and other services paid for by the poor. The government is unfortunately complicit and doing all it can to deliver these benefits for a wealthy minority at the expense of the poor majority.

Ruling elites should however be worried. The resulting further build-up of wealth in the hands of a few from reducing the incomes of the many will only increase social conflict and tensions, intensify class contradictions, and create the conditions for a great upheaval. The real reforms will come after this.

From ngcp.ph

In 2001, the Electric Power Industry Reform Act (EPIRA) was enacted with the promise of delivering affordable and reliable electricity to the country. Sixteen years later, electricity remains expensive and unreliable, and electric power industry monopoly has intensified, further enriching big firms. The following points elaborate on why the Duterte administration should all the more be challenged to review EPIRA and begin reversing power privatization:

  1. Privatization, deregulation drive power rates up. EPIRA or Republic Act (RA) 9136 led to the privatization and deregulation of the country’s power sector, promising that increased competition will usher cheaper and more sustainable energy supply.  However, since then, residential power rates have risen by 68% from Php5.76 per kilowatt-hour (kWh) in 2001 to Php9.68 in 2015.

A 2016 survey conducted by the International Energy Consultants showed that the Manila Electric Company or MERALCO has the third highest electricity rates in Asia after Japan and Hong Kong.  The same study reported that Meralco consumers spend 4.5% of their disposable income on electricity which is higher than the 3.9% global average.

  1. Electric power industry monopoly reaps benefits.A few big firms are controlling and greatly profiting from the electric power industry.  According to the Department of Energy (DOE)’s latest EPIRA status report, only four corporations – San Miguel Energy Corporation, Aboitiz Power, First Gen, and government privatization entity Power Assets and Liabilities Management Corporation (PSALM) – cornered 65% of market share in power generation in 2015. The same year, top ten power corporations had combined gross revenues totaling Php500.9 billion. Leading the pack was MERALCO which accounted for 50% or Php250.1 billion of this.
  1. Consumers shoulder the cost of doing business.EPIRA has also allowed profit-seeking power corporations to pass on the costs of doing business to end-consumers.  Since 2003, when EPIRA mandated the “unbundling” or reflection of various charges on electric bills, the government through PSALM has been imposing the universal charge (UC), a pass-on charge to all electricity end-consumers.

Through the UC, EPIRA has passed on costs that private corporations should shoulder to electricity consumers, such as the stranded contract costs and stranded debts of the National Power Corporation (Napocor). Stranded contract costs are those that Napocor acquired from the excess costs of electricity contracted from independent power producers (IPPs) over the actual cost of electricity in the market. Stranded debts are also from other onerous terms in Napocor’s contract with the IPPs in the 1990s.

Among the billing components, overall UC increased the highest by 298% from Php0.03 in 2003 to Php0.35 in 2015 for Meralco customers.

In the face of expensive and unstable electricity supply, the Duterte administration, as an initial positive step, should launch a comprehensive review of EPIRA and the negative impact of privatization on the electric power industry. The administration should reverse and consider alternatives to power privatization in the Philippines. A nationalized energy industry that could ensure sufficient and affordable if not free electricity for the majority of Filipinos, for example, can be made a priority in government’s infrastructure boom program alongside other public utilities and social services.

 

Photo by Marcin Gabruk

by Sonny Africa

The Duterte administration’s public launch of its PDP 2017-2022 on June 2 somewhat coincidentally happened the day after the supposed June 1 end of the fifth round of peace talks between the Philippine government’s peace talks and the National Democratic Front of the Philippines (NDFP). The cancellation of talks by the government is unfortunate because discussions on a comprehensive agreement on social and economic reforms (CASER) were meant to take up most of this fifth round. This would have been an opportunity for new thinking on the part of the government to replace the failed neoliberalism of old.  #CASERGoals

 

IBON FEATURES–While lucid the plan is still wrong and will keep the Philippines backward. Three major flaws immediately come to mind, all of which stem from the plan’s obsolete market fundamentalism.

First, the plan avoids correcting the severe asset inequities and income imbalances that keep millions of Filipinos marginalized from meaningful economic activity. This means that all the plan’s rhetoric about creating economic opportunities will really just mean greater profitable opportunities for the few who have the accumulated assets and incomes to begin with. Free market economics exalts asset accumulation as proof of efficiency and income inequality as incentivizing efficiency.

Second, the plan is blind to the urgency of industrial development. The Philippine economy has to be rebalanced away from its bloated service sector towards real domestic industry. The plan succumbs to the outdated globalization propaganda that the only industry worth developing is what the world market decides is globally ‘competitive’. The industrialized countries promote this notion to preserve their privileged industrial status and the economic and political power that comes with this. The plan also crudely believes that liberalized market forces deepen and modernize the economy, produce high growth, and reduce joblessness and poverty.

The plan does not recognize the importance of industrialization. For instance, it illogically lumps together “industry and services” with the shallow aspiration for these to be “globally competitive as the country strengthens its economic ties with other countries”. This is perplexing.

Industrial activity and services are vastly different in nature and have vastly different contributions to development. Industrialization creates more employment, raises incomes higher, stimulates greater economic activity, and drives better science and technology. This is why industry has primacy when pursuing strategic economic development. The lumping together is all the more baffling considering how ‘services’ cover a wide range of disparate activities from food to finance, health to hotels, call centers to communication, and many others.

The plan also adopts the textbook approach of trade based on comparative advantage as determining the choice of industries and services and driving development. The real world approach should instead be to adopt policies that modify and create comparative advantages that deliver more far-reaching changes and are more strategic over the long-term. In terms of industry this means steadily working towards having Filipino firms using the country’s vast natural and human resources to produce capital, intermediate and consumer goods on a large-scale.

This means national industrialization that aligns policies on foreign trade and investment, on finance, monetary and fiscal matters, on education, science and technology, and on the environment to serve strategic industrial goals. Industrial policy has to focus on building domestic industrial capacity to meet domestic needs, create domestic jobs, and raise domestic incomes. Such a focus will also involve linking up with the agricultural and service sectors.

The plan’s proposals work against this and surrender the necessary state policy instruments to industrialize the economy. It seeks to remove restrictions to foreign investment which are crucial for ensuring that foreign capital contributes to domestic development. It seeks to remove regulatory requirements and procedures which are crucial to ensure that firms operate in ways consistent with broader development goals. These and other policy tools were essential elements in the rise of all the old industrial powers as well as in the emergence of all the recent high-performing developing countries.

The plan’s agnostic market-driven approach will relegate the Philippines and Filipino producers to low value-added activities and in effect letting foreign producers get the most advantage from the country’s natural resources and labor power. There is no historical precedent of free market forces transforming any national economy to higher value-added and more diversified activities.

It is natural to be skeptical of the government’s capacity for responsible industrial intervention. The country has a long history of regulatory capture, rent-seeking, crony capitalism and the like which has resulted in wasted public resources and economic backwardness. The appropriate response however is not to glorify market forces but to improve governance. The capacity to intervene is developed by intervening and the quality of intervention can only improve in step with improvements in government transparency and accountability.

Third, the plan turns over vital social services and public utilities to profit-seeking private sector interests which will make these unaffordable and inaccessible for the majority of Filipinos. The plan continues government neglect of its responsibility to ensure that all Filipinos have the basic services so necessary for minimum standards of decent living. It does not correct the growing privatization of education, health, housing, water, electricity and transport which are more and more becoming commodities to profit from than vital services to live by.

Universal provision of these has to be ensured. Yet instead of developing public capacity in providing these, the plan calls for encouraging greater private sector participation through greater incentives and streamlined processes especially in infrastructure. This will result in more public resources supporting private profits, aside from adding a profit premium to basic services.

Forward

Undertaking social and economic reforms is certainly an arduous task. This starts with discarding market fundamentalism that glorifies profit-seeking and self-interest as resulting in economic efficiency and development. Market fundamentalism is a notion that has been justifiably criticized across ideological boundaries since the 19th century and until today – from Karl Marx to Joseph Stiglitz, from Mao Zedong to George Soros, and from rightist populist politicians to the revolutionary Left.

The Philippines’ experience with failed neoliberal policies is clear and consistent with similar failures in the rest of the world. Real changes in policies are needed to bring about real development. The PDP 2017-2022 is too consistent with its predecessors and will just be the latest in a long line of failed development plans. It simplistically assumes that making it easier to do business, attracting more foreign investment, and building more infrastructure will result in a bright future.

On the contrary, the plan’s market fundamentalism will keep the economy backward and Filipinos poor. Industrial production will continue to be foreign-dominated, our mineral and agricultural raw materials will serve foreign economies more than national development, our citizens will keep having to go overseas for work, and unemployment and poverty will remain endemic. All this while a few foreign investors, domestic conglomerates, and rich families continue to grow rich and prosper.

The Duterte administration’s public launch of its PDP 2017-2022 on June 2 somewhat coincidentally happened the day after the supposed June 1 end of the fifth round of peace talks between the Philippine government’s peace talks and the National Democratic Front of the Philippines (NDFP). The cancellation of talks by the government is unfortunate because discussions on a comprehensive agreement on social and economic reforms (CASER) were meant to take up most of this fifth round. This would have been an opportunity for new thinking on the part of the government to replace the failed neoliberalism of old. The peace talks and these discussions can still continue, however, and the country’s policies, the economy, and the people will be the better off for this.

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