Policy Paper

From mb.com.ph

There is still much to be done for the Duterte administration to overcome the Philippine government’s stubborn adherence to old and discredited anti-Filipino neoliberalism. This overrides and is inconsistent with Pres. Rodrigo Duterte’s otherwise pro-poor and pro-Filipino pronouncements. This is also notwithstanding the welcome appointment of activists and progressives to important cabinet and other positions on agrarian reform, social welfare and development, labor and employment, anti-poverty, and the environment.

In particular, the 10-point economic agenda of the economic team still upholds the failed notion that creating the most profitable market conditions for big business, especially big foreign investors, is the best strategy for economic development. This is certainly the best strategy to increase foreign corporate and oligarch profits but it does not and can never deliver socioeconomic development for the poor majority. The recent experience under the old Aquino administration underscores this. The rapid economic growth greatly increased the wealth and profits of a few — but the historic crisis of joblessness worsened, covering unemployment and deteriorating quality of work, and tens of millions remain in crushing poverty. Agriculture and fisheries weakened while genuinely Filipino industry continued to decline.

The continued neglect of national industrialization is especially glaring. The economic team wrongly equates “made in the Philippines” by foreign investors as industrialization even if what is really needed is “made by Filipinos” or by Filipino industrial firms. The government’s industrial policy is, at best, for foreign manufacturers and their subcontractors to set up shop in the Philippines so that the country’s cheap labor and raw materials keep getting exploited by foreign industrial powers.

Nothing in the economic team’s official thrusts support pro-Filipino industrialization. Yet Filipino industries producing using the country’s rich natural and human resources are necessary for the majority of Filipinos to truly benefit from these resources.

A few developments in the first 100 days do create the potential for the needed shift in economic strategy — the progress of peace talks with the National Democratic Front of the Philippines (NDFP) and pronouncements that the government will adopt a more independent foreign policy. It is still early and the Duterte administration treats these as largely political matters but taking them to their logical socioeconomic conclusions will yield vast benefits for the economy and the Filipino people. They can be crucial elements for reorienting national economic policy towards the new, progressive, and long-term national industrialization policy that is so vital for the country’s development. They deserve the people’s full support and enthusiasm.

Positive: Pro-Filipino stance

  1. The continued progress in peace negotiations between the government and the NDFP is an important high-level process of the Duterte government for addressing the nation’s economic woes. The second round of the talks take up the crucial peace agenda of socioeconomic reforms with the comprehensive agreement on social and economic reforms (CASER) already described as their “center of gravity”. This is because the CASER tackles the country’s underdevelopment which creates the conditions for armed conflict. Concluding a substantial peace deal creates the possibility of a seismic shift from destructive neoliberal economics to nationalist and pro-people economic policy.
  2. The president’s recent pronouncements of adopting an independent foreign policy, including his criticisms of the US, can be the start of a real shift in foreign policy where the country navigates regional and global geopolitics as a sovereign nation rather than a vassal state of the US. The president has criticized the US for its interference in the Philippines, military exercises in Mindanao, and even the violent colonization of the Philippines and subjugation of the Moro population. He has also threatened to stop implementation of the Enhanced Defense Cooperation Agreement (EDCA) and expel US military forces. On the other hand, he has expressed interest in closer ties with China and Russia. This includes bilateral talks and greater diplomacy with China on disputes in the South China Sea/West Philippine Sea in contrast to the previous administration’s US-driven militarist approach. This patriotism on geopolitical matters can and should be extended to the economy with greater economic nationalism.

Negative: Neoliberal agenda

  1. Nothing in the economic team’s official thrusts support pro-Filipino industrialization. The People’s Agenda listed a few initial and very doable proposals for promoting national industrialization for national development but none have been adopted in any form. Indeed, the undue importance that is still given to attracting foreign investment and to further opening up the economy even undermines potentially positive statements such as about building the steel industry as the backbone of industrialization.
  2. Economic strategy is still geared to attracting foreign investors to set up their low value-added enclave firms or to subordinate Filipino small- and medium enterprises (SMEs) to their global value chains. This does not put the country on the road to eventually being able to produce Filipino products from our rich natural and human resources. Such a strategy on the contrary ensures that the country’s mineral and agricultural resources and our vast skilled labor force will still be exploited by foreign firms or otherwise still benefit foreign economies.
  3. The administration continues to negotiate unequal free trade agreements (FTA). The on-going talks for the Regional Comprehensive Economic Partnership (RCEP) and European Union-Philippines (EU-PH) FTA follow a template of liberalization in trade, investment, and the rest of the economy. These prematurely expose the economy to competition with advanced industrial powers, drastically restrict the country’s space for national development policies, and will stifle Philippine development. The economic team is even aggressively seeking to join the US-dominated Transpacific Partnership (TPP) agreement despite this deal already facing rough sailing within the US as well as with some other countries involved. This surrender of economic sovereignty is a major contradiction to the president’s declared stance of an independent foreign policy.
  4. The economic team is biased for big business and other elite interests. There have not been any moves for meaningful wage hikes or to truly end contractualization, both of which are vigorously opposed by employers. The moratorium on land conversion so needed by farmers and proposed by the secretary for agrarian reform is being publicly contradicted by the government’s economic managers to favor real estate, agribusiness and tourism interests in rural areas.
  5. The economic team continues to favor public private partnerships (PPPs). This means that public funds will continue to subsidize private profits from infrastructure projects. The public will bear the higher taxes needed for this as well as higher fees on utilities and services. More and more urban and rural resources and spaces will be turned over to oligarch profit-making rather than primarily used for the benefit of the people.
  6. The Department of Finance (DOF) is proposing to lower taxes on the rich while increasing those paid by the poor. The country’s biggest corporations and wealthiest families will benefit from the neoliberal tax thrust of lower income taxes, estate taxes, donor and transaction taxes on land, and capital income taxes. The revenue loss will be offset by charging the poor higher prices on goods and services with value-added tax (VAT) being charged on previously exempt items, higher excise taxes on petroleum products, and a new sweets tax.

Challenges

The Duterte administration is still just in its first few months and its economic strategies are not necessarily already firmly established. It can still claim the development high ground with even just a few significant policy measures:

  1. Declare national industrialization the major strategy for Philippine development. The Duterte administration should immediately reorient national economic policy towards a new, progressive, and long-term national industrialization policy.
  2. Launch a nationwide “Buy Filipino, Build Filipino” campaign for Filipino producers and consumers to work together in building a pro-Filipino economy. This can be done immediately as a very easy but symbolically significant first step. Filipino manufacturers should correspondingly be given immediate relief by stopping corruption in the Bureau of Product Standards (BPS), Food and Drug Administration (FDA), and Bureau of Customs (BOC) that results in smuggling of cheap imports, by removing incentives giving undue advantage to foreign manufacturers, and by genuinely giving priority to Filipino-made products in government procurement.
  3. Institutionalize priority measures to promote national industrialization. This can start with the creation of a multi-sectoral National Industrialization Council involving the government, Filipino industrialists, micro and SMEs (MSMEs), labour unions, people’s organizations, academe, and other civil society groups. Other measures include creating and implementing a National Industrialization Financing Program, an MSMEs for National Industrialization Program, a Filipino Industrial Science & Technology Strategy, and creating a Department for Industry and Commerce.
  4. Assert the country’s economic sovereignty. This can be done by renegotiating or withdrawing from international economic deals that damage the national economy and that prevent the Philippines from using protectionist policies that the developed countries themselves used and even continue to use.
  5. Explore economic relations outside of its accustomed US-, Japan- and Western Europe-centric circles. The Duterte administration can pursue new arrangements for development finance, technical assistance and infrastructure projects with the Asian Infrastructure Investment Bank (AIIB) and New Development Bank (NDB). It can explore deeper bilateral relations with China, Venezuela or Iran for infrastructure, iron and steel, oil and renewable energy ventures, with Cuba for medical research and biotechnology projects, with Norway for energy, metals and shipbuilding projects, with Sweden for telecommunications, iron steel, and automobile projects, and others.
  6. Unilaterally withdraw from the so-called Partnership for Growth (PFG) with the US. This sends an unequivocal signal that the country is adopting independent foreign economic policy. The US$739 million (Php33 billion) PfG is an intrusive US mechanism for directing Philippine economic policy. This US program seeks to shape the country’s economic policy and institutional environment to become more open and profitable to US investors and corporations. These mean terms one-sidedly beneficial to foreign capital and against sustainable Filipino economic development. The PFG is the most comprehensive US intervention in economic policy-making today and is explicit in pointing out the Constitution as among the major hindrances to foreign, including American, investment.
  7. Take the lead to build or join a regional or global united front against the biggest and most aggressive advanced capitalist powers. Duterte is expressing anti-foreign intervention sentiments that are likely shared by many other countries in Southeast Asia and the rest of the world that have long been chafing under the interference of the traditional big foreign powers. Yet the rise of the BRICS as alternatives to the traditional economic powers creates new opportunities in the global economy despite the protracted economic stagnation. A new national development strategy can take advantage of this.

From youronevoicecanmakeadifference.wordpress.com

by Sonny Africa

(Second of Two Parts)

Read Part 1

Significant additional revenues can be raised with some basic reforms in the country’s regressive and pro-elite tax system. This is the most rational and sustainable way of ensuring that there are resources for social and economic spending biased for the needs of the poor majority of Filipinos.

Changing direction

What does a progressive tax system look like? Some elements of the proposed tax reforms can be useful as part of a genuinely progressive tax reform program.

It is useful to remove redundant fiscal incentives on corporations and to make these more transparent, targeted, performance-based, and time-bound. The DOF estimates up to Php50 billion in foregone tax revenues from special rates given to large firms; some Php33.8 billion is expected to be gained from rationalizing fiscal incentives. It would however be even better if more of these incentives were given to Filipino industrial firms rather than to the foreign and commercial or service enterprises that dominate the local economy.

It is also useful to adjust the valuations of properties to earn more from real property taxes. The DOF has for instance reported that the assessed LGU market value on Ayala Avenue is just Php40,000 per square meter even if actual market value is at least Php400,000 per square meter. This has helped make land developers among the richest oligarchs in the country. Up to Php43.5 billion can be raised from more accurate valuations on real properties.

Tax administration reforms in the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) are sorely needed. The government’s tax efficiency is among the lowest in the region – meaning that it is not collecting as much as it should at current tax rates. The government’s tax effort, or total tax revenue as a share of gross domestic product (GDP), is around 12.4% which is slightly higher than Indonesia’s (11.8%) but much lower than in Vietnam (24.3%), Thailand (17.1%), Malaysia (15.3%), and the average for East Asia and the Pacific (16.3%). This is despite the Philippine’s VAT (12%), corporate income tax (30%), and highest personal income tax rate (32%) being mostly higher than in these countries. This is also an indicator of how much corruption has to be resolved in the BIR and BOC.

Likewise with budget reforms to reduce leakages from corruption and inefficiencies. But then claims at budget reforms are undermined by allegations that the 2017 budget retains pork barrel for legislators and still gives the executive branch undue discretion over trillions of pesos of special purpose funds.

Relaxing bank secrecy for fraud cases potentially allows the BIR to more fully audit people who do not pay the right taxes. The DOF explains that 40% of income comes from professionals and the self-employed but they pay only 20% of income taxes, indicating high tax evasion. Including tax evasion as a predicate crime to money laundering is also potentially useful against tax evaders. However the danger in the Philippine context of severe inequity is that these just end up being used against middle class taxpayers rather than the very rich and well-connected. These expanded powers may also be abused for self-serving political purposes, such as how the previous Aquino government apparently used anti-money laundering powers against former chief justice Renato Corona and other political opposition.

Right direction

But the most important tax reform is really to come up with a genuinely progressive program that taxes those few but with a huge ability to pay more while relieving the overwhelming majority who are struggling with such low incomes. The country’s tax system should be designed according to the country’s concrete condition of severe inequality and widespread poverty – not from what is seen as ‘doable’ for being unopposed and supported by the rich and by big corporations.

Some 17 million Filipino families (80% of all families) earn at most around Php20,000 a month; the poorest half (53%) try to live off less than Php13,000 a month and the poorest fifth (20%) on an average of less than Php5,600 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 country’s richest 326,000 families (1.5% of all families) earn an average of Php106,000-191,000 a month. The CEOs of San Miguel Corporation (SMC), First Philippine Holdings (FPH) and Meralco earn Php5.0-5.9 million a month. The country’s 50 richest oligarchs have a combined net worth of US$79.5 billion or Php3.8 trillion at current exchange rates. There are also at least 690 “ultra high net worth” Filipinos with at least Php1.4 billion in assets each. The country’s top 1,000 corporations meanwhile made over Php1.1 trillion in combined annual profits and the 265 Philippine Stock Exchange (PSE)-listed firms some Php581 billion.

These rich families and large corporations are the biggest beneficiaries of the Philippine economy, natural resources, government, and the labours of the Filipino working people. They can and should pay more taxes to fund social and economic services for the majority.

Taxes on income, wealth, property, investments and the biggest corporations have to be increased rather than decreased. Paying taxes are the most systematic expression of social responsibility and far superior to individual charity or even so-called corporate social responsibility (CSR). The worsening inequality in the country indicates how such voluntarism is not really effective in distributing gains from the economy.

For instance raising income taxes on just the richest 1.5% of Filipino families will not only reduce the extreme inequality in the country but also raise some Php91 billion. 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 Php2,287,836. Taxing just an additional 20% of this income will 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 Php1,271,484. Taxing just an additional 10% of this income will raise Php20 billion.

Higher top personal income tax rates are needed. It will be recalled that these reached as much as 70% in 1973 and 60% in 1982 before being cut to 35% in 1986, 33% in 1999, and finally to 32% in 2000.

Higher corporate income tax rates on large corporations are also needed. For instance, restoring the corporate income tax to its 35% rate before 2009 would also immediately raise at least Php20-30 billion. Micro, small and medium enterprises should meanwhile be supported with lower income taxes than charged to large corporations. This is aside from how as much as Php409 billion more can be raised from aggressive collection of corporate income taxes especially from large corporations. IBON estimates up to Php780 billion in potential tax revenues from firms in 2012 yet only Php371 billion was actually collected by the BIR.

Wealth should be taxed when it is accumulated or transacted such as through higher wealth, capital gains and inheritance taxes. Actually more effective collection of estate taxes on super-rich families could already raise hundreds of billions more in revenues. The BIR’s average annual collection of estate taxes of less than Php600 million in the decade 2000-2009 compares poorly with the Php3.8 trillion in wealth accumulated today by the 50 richest Filipino oligarchs and their families.

The distractions and indulgences of the rich should also be taxed more. It is possible to design a tax regime of excises taxes or higher VAT on luxury spending such as on high-end automobiles, yachts, jewellery, five-star hotel bars and restaurants, casinos and others. The DOF has estimated at least Php7.7 billion in revenues from taxing luxuries but it is not clear how this will be raised.

Taxation for development

Progressive tax reforms raises government resources for directly providing free or affordable education and health, financing public utilities in water, electricity and transportation, subsidizing pensions and other social security benefits, and providing for other socioeconomic investments. It also lessens inequality and may contribute, even if only slightly, to eroding the economic base that oligarchic elites wield to dominate Philippine economic and political life.

But such tax reforms are of course just part of an overall development policy offensive. Complementary economic reforms are crucial including real asset redistribution, fair distribution of gains from growth, and the general direction of national industrialization for the economy. The solid and equitable economic growth from these will also make government revenues increase even more.

The administration’s economic team sees a window of opportunity to push this regressive neoliberal tax program. The team senses the public clamor for changes in the traffic situation, bad public health and education, government red tape and bureaucracy, poor government services, and others. They are also aware that the public perception is of real change happening under the Duterte administration – coming from his unorthodox manner, open criticism of the country’s oligarchs and even the United States (US) government, the appointment of Leftists in his cabinet, the determined push for peace talks with armed revolutionary groups, enabling freedom of information by executive order, coming down hard on illegal drugs, and others.

The economic team will exploit this desire for change with the argument that its tax program will give more and better public services. But while it is true that the people need vastly improved public services this should be financed by those who have already accumulated so much and not by those who have so little as it is. The Duterte administration proclaims a pro-poor bias and is challenged to muster the political will to tax the rich. — IBON Features

From correctphilippines.org

by Sonny Africa

(First of Two Parts)

The Department of Finance (DOF) will submit a tax policy reform program to Congress in September. The administration’s economic managers are using Pres. Rodrigo Duterte’s current popularity to push an unpopular pro-rich neoliberal tax agenda. The proposed program lowers the tax burden on the rich and on big corporations and offsets this with greater taxes on the country’s poor majority.

Every government taxes to fund its operations and provide public services. The Philippine national government and local government units do this. Even alternative centers of political power in rural areas such as the National Democratic Front of the Philippines (NDFP) and Moro Islamic Liberation front (MILF) do this. Taxation is central to governance.

The Philippines certainly also badly needs better social and economic services. The public education, health and housing systems are decrepit and grossly insufficient for people’s needs. Current transport, communication, power and water infrastructure cannot support real national development. Worryingly, oligarchic private sector interests have already seized on these public scarcities as opportunities to further amass private monopoly profits.

So tax reform is needed and integral to developing the economy. It is important to make real headway in ending chronic poverty and joblessness for tens of millions of Filipinos. Tax reforms are undoubtedly long overdue.

Wrong direction

But the DOF’s proposed tax program is not what the country needs and on the contrary is a big step in the wrong direction.

The tax reform program seeks to raise an additional Php600 billion by 2019 ostensibly to fund priority investments of the Duterte administration. Most of this will come from taxing the poor to make up for revenue losses from taxing the country’s rich and ultra-rich less. Php400 billion will come from raising taxes and another Php200 billion supposedly from tax administration reforms, spending efficiency, and higher economic growth.

The DOF tax program is still being finalized but its key elements have already been identified. The program consists of four (4) bills each constituting a package of measures. These are targeted to be passed in January 2017, June 2017, June 2018 and January 2019 respectively. Congressional deliberation on the first tax package is seen to start in October or November this year.

Taken altogether, the program includes measures that will lower taxes paid by the rich.

Rich will be paying less

Personal income taxes will be lowered towards an eventual maximum rate of 25 percent. The DOF says that the highest income earners may still be taxed higher than this but does not offer any figures. Around Php139.0 billion in revenues is expected to be foregone from lower personal income taxes.

Lowering personal income taxes starts with coming up with new tax brackets to reflect changes since the existing brackets were drawn up in 1997. Rising incomes have pushed taxpayers into higher income brackets – with correspondingly higher tax rates – even as rising prices have eroded the real value of these incomes. The ultra-rich and wealthiest who were already in the highest tax brackets meanwhile still pay the same tax rate.

The tax brackets and taxes due will be changed so that those earning up to Php250,000 per year – or about Php19,230 monthly (computed at 13 months of pay in a year) – will pay a fixed amount of Php2,500. This is up to Php47,500 less than they are paying today, according to IBON estimates. This is very welcome relief for these low income taxpayers.

But those earning a million pesos a year for instance will also be paying less – around Php92,700 less in the first year of implementation and then Php130,700 less in the second year of implementation. Those earning Php5,000,000 a year will save even more – paying Php112,500 less in the first year of implementation and then Php260,000 less in the second year. The tax these wealthy individuals pay may even fall further after the third year as the DOF continues to adjust personal income tax rates downward. This reduction in income taxes paid by the ultra-rich and wealthiest Filipinos only reduces potential revenues for the government and worsens inequality in the country.

Corporate income taxes will be lowered towards an eventual maximum rate of 25 percent. The DOF says that other corporate income tax provisions will be “simplified” to improve compliance. The details are not clear but the DOF’s logic generally seems to be that “simplifying” means reducing taxes to enjoin tax evaders to start paying properly. Corporations will be paying Php34.8 billion less in income taxes. As with personal income taxes for the rich, this reduction in income taxes paid by corporations reduces potential revenues for the government and worsens inequality in the country.

The rich get further benefits. The tax rate will also be lowered on many property-related transactions involving mainly the wealthy: estate taxes, donor taxes, transaction taxes on land (ex. documentary stamps tax, transfer tax, registration fees). The DOF for instance said that it wants the estate tax of 20% cut to as low as 6% of the value of property being transferred. The rich will pay Php3.5 billion less in estate and donors taxes.

The capital income tax rate will also be lowered. The tax on interest income earned on peso deposits and investments will be lowered from 20% to 10%, mainly benefiting the rich with massive peso deposits. The rich will pay Php1.0 billion less in capital income taxes.

The few rich Filipinos will pay much less taxes so the DOF offsets this by increasing taxes on the majority poor that will raise the prices of goods and services that they consume.

Majority will be paying more

VAT (value-added tax) will start to be charged on previously exempt items. Examples of currently VAT-exempt transactions are raw agricultural and marine products, livestock and poultry, breeding stock, fertilizers, seeds, fingerlings, feeds and ingredients for feeds, and personal and household effects brought into the country by returning overseas Filipinos or by non-residents settling in the country.

Imports of professional instruments, clothes, domestic animals, direct farm inputs, farm machineries and equipment, fuel and goods used for shipping and air transport are also currently VAT-exempt. Likewise with services by agricultural contract growers and millers, sales by agricultural cooperatives, lending by credit cooperatives, and sales by any other cooperatives. Services of banks and non-bank financial intermediaries – which also includes money changers and pawnshops – are VAT-exempt as are various sales of real property. The DOF is also proposing to limit VAT zero-rated transactions only to direct exporters.

It is not yet clear what items will begin to be charged VAT but the DOF has already said that exemptions will be limited to raw food and necessities like education and health. This means that the prices of many non-raw food items and many non-education and non-health services will increase because of the newly-imposed VAT on them. This will be paid for by Filipino consumers, the majority of whom struggle to pay for their basic needs with the little disposable income or savings they have.

This so-called expansion of the VAT base – a euphemism for imposing new VAT on the people – is seen to raise Php163.4 billion in revenues taken from consumers’ pockets. The government has been using the regressive VAT as an easy way to raise revenues since 1988.

The excise tax on all petroleum products will be increased and thereafter indexed to inflation. The petroleum excise tax is a fixed peso amount levied on every litre of particular petroleum products. Indexing this to inflation means that the tax will be periodically adjusted higher which means a perpetually growing tax on petroleum products and correspondingly higher prices.

Fuels with direct effects on consumers such as diesel, LPG and kerosene but also items like bunker oil and asphalt are currently not levied an excise tax. On the other hand, there are excise taxes of up to Php4.50 per litre or kilogram on oil products like gasoline, aviation fuel, lubricating grease and oils, naptha, and others.  The DOF said that it wants to impose a tax of Php6 per litre on diesel, among others, which is commonly used by public utility vehicles and by trucks transporting goods, as well as on LPG and kerosene which are directly consumed by poor households. It may also raise existing excise taxes to up to Php10 per litre or kilogram.

The higher excise tax on oil products will raise Php178.2 billion in revenues. These billions are ultimately taken from consumers’ pockets when they buy oil products directly or when these are passed on in higher prices of goods, services and transport fares.

There will also be a tax on sugary products that will also be indexed to inflation. The sugar excise tax starts at Php5 per kilogram. This will increase the price of raw sugar to Php52 per kilogram (a 10.6% increase from Php47 pesos/kg) and of refined sugar to Php55 per kilogram (a 9.1% increase from Php55/kg). The prices of fruit drinks, sodas, sweetened tea and coffee, sports and energy drinks, and many other non-alcoholic drinks in liquid or powder form will increase. This will mean some Php18.1 billion pesos taken from consumers’ pockets directly when they buy sugar or when food manufacturers pass on the tax to them in the price of the food and drinks they produce.

There is even a proposal for a legislated final tax amnesty, except for criminal cases. The proposed minimum amnesty payment is 40% of the basic deficiency with no further amnesty for 25 years. This is intended to clear all tax dockets in the BIR, BOC and in the courts. But this is too lenient on tax evaders and in effect even rewards them for non-payment. A more determined implementation of tax laws is a better option.

The net result of all these is straightforward: the poor are made to shoulder taxes that the rich will no longer pay.

Misdirection

The DOF will create a smokescreen for its proposed regressive measures.

It will play up how lowering income taxes will benefit middle-income families who suffer tax brackets that are unchanged since 1997. They fully deserve this income tax relief because they really are paying much more than they should. The existing tax brackets have not kept pace with their growing incomes and rising prices of goods and services. This group will be understandably vocal in the mass media and social media.

But IBON estimates that only some 6.7 million deserving wage and salary earners will actually gain from the adjusted tax brackets. There are 23 million wage and salary workers in the country but 16.3 million of these are already exempt from paying income tax because they earn just the minimum wage (4.1 million) or less than this (7.5 million). Yet all of them will have to deal with higher prices from the DOF’s higher taxes on so many goods and services.

The DOF will also claim that the way to fix the tax system’s inefficiency is to simplify it. The argument will be that treating the rich too differently and having too wide a gap between the treatment of the rich and the poor is too “complex”. “Inefficiency” is in effect resolved not by improved enforcement against the wealthy, which is the logical thing to do, but by enjoining them to pay the lower taxes under a “simplified” tax regime. This really means that the poor are made to bear the burden of the government’s inability to tax the rich.

The DOF knows that its tax program will mean higher prices for the goods and services the poor consume and lower real incomes for them. The DOF will divert from this new normal of eroded real incomes of the poor by claiming that this is compensated by targeted cash transfers and other social protection schemes. This includes 4Ps cash transfers, which the poorest are already getting, and the proposed additional rice subsidy. Senior citizens may also be given slightly higher pensions and allowed a larger senior citizen’s discount; but unlike the proposed tax increases these are not yet certain.

There will also supposedly be discounts on public utility vehicles to moderate the cost of commuting a little, more lifeline subsidies for low income consumers, and higher PhilHealth coverage and benefits for persons with disabilities. The problem however with such targeting and selective support is that they do not really address the problem created of higher bus, jeepney and tricycle fares, more expensive electricity, and more expensive privatized health services. This government-funded social protection is also logically going to be less than the taxes the poor are made to pay because if it were the same then the desired net revenue increase would not materialize.- IBON Features

IBON proposed national industrialization as strategy at National People's Summit

IBON- NI (for peoples summit), Jun 16 v.2

Tens of millions of Filipinos suffer crushing poverty while a handful of foreign investors and domestic oligarchs prosper from the country’s natural resources and labor power. The situation has worsened after almost four decades of neoliberal globalization policies, including those under the outgoing Aquino administration. A clean break from chronic poverty, widening inequality and underdevelopment is possible if the incoming Duterte government will take the side of the majority of Filipinos over foreign and domestic elites.

The Philippines has rich potential for development with its 103 million population and vast natural resources. Yet we are in our worst crisis of joblessness in our entire history. There are now more Filipinos that are unemployed, engaged in poor quality work, or forced abroad than there has ever been. This includes 28.7 million unemployed, non-regular, agency-hired, informal sector, and unpaid family workers in the country. On top of this are as much as 12 million overseas Filipino workers (OFWs) and their families. Incomes also remain extremely low with some 80% of the population struggling to live off Php120 or even much less per day; over one-fourth (26%) of Filipinos live in extreme poverty.

While the outgoing Aquino administration boasts a fast-growing economy it has actually created less new jobs per year during its term than in the previous decade. Only an average of 692,000 new jobs were created annually in the period 2011-2015 which is much lower than the 858,000 over 2001-2010. Worsening domestic job creation drives Filipinos abroad with almost three times as many Filipinos forced to work abroad than able to find work here at home, with some 5,000 OFWs deployed daily compared to less than 1,800 new jobs created in the country.

Philippine industrial backwardness is among the biggest strategic reasons for these and many other dismal features of underdevelopment. The country is among the most mineral-rich in the world and ranks 3rd in gold, 4th in copper, 5th in nickel, and 6th in chromite. We have many of the basic minerals needed for industrial development. There are also vast agriculture, forestry, aquatic and energy resources. Our population, which is the 12th largest in the world, is a huge prospective domestic market and productive labor force.

Yet our economy remains backward, agricultural, and with an insignificant industrial sector. The agricultural sector has fallen to its smallest share of the national economy in history. Manufacturing is down to what it was in the 1950s with, for instance, some 73,000 manufacturing firms shutting down in the last decade alone. The economy has become a shallow service and trading economy rather than a producing economy since the 1990s.

Philippine resources and possibilities are immense yet the domestic economy is more than ever unable to produce the goods and services needed by the people, relying instead on foreign producers and technologies. Ironically, many of the foreign goods and services we buy are actually produced using Filipino resources and labour power. There is also massive denationalization of manufacturing with foreign transnational corporations accounting for two-thirds (65%) of manufacturing output.

Our industrial backwardness has huge adverse implications. It results in massive domestic joblessness. Buying imported goods supports jobs abroad rather than in the country. Exporting our raw minerals and agricultural resources for processing in other countries creates jobs in those countries rather than here. Our people are thus forced into uncertain informal jobs or to work overseas. The absence of a robust, integrated Filipino industrial sector keeps our science and technology backward, keeps us dependent on foreign goods and services, and prevents us from benefiting from our natural resources. The domestic economy does not generate as much economic surplus as it could which keeps incomes low aside from giving foreign capital undue leverage over national economic policy.

The Filipino people deserve and demand an industrial economy that imiproves the standard of living of the majority and that strengthens the country’s national independence and self-reliance. We need to transform the Philippine economy from its current backwardness into an industrial power. The incoming Duterte administration can choose to start the country on a path of national industrialization and national development. These are our proposals to move forward…

 

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