We had heard the promises that the 15th president of this country pledged one year ago to this 92 million-strong nation. In his ever first State-of-the-Nation (SONA) address, President Benigno Aquino (or P-Noy for short) had shortlisted in approximately 4,000 words his plan of action for the full six years of his term.
As days turned to weeks, and weeks to months, most of the promised reforms have yet to see substantial progress. Well, we were warned that the straight path, as against a crooked path of personal interest and political compromises, is not going to be as easy as it sounds.
One year gone, five more to go. P-Noy’s first year started with a number of crackdowns on corruption, most famous being the reference to that Lamborghini of a pawnshop owner who reputedly failed to pay correct taxes (or more accurately, failed to declare the proper income statement).
We were promised a new case ever week against smugglers and those who did not pay the right taxes. For some weeks, Filipinos were feted to some new “corruption” scandal. Then reality seeped in when the administrative weight of four cases a month became apparent.
If my memory serves me right, not one case filed has been successfully resolved in the government’s favor – yet. Meanwhile, our tax courts staffed by harried public servants continue to be burdened by those endless hearings that seem to go nowhere.
Buying love, then and now
P-Noy pointed out how the previous administration had misappropriated funds to serve its own devious purposes and interests. But aside from diverting money to favored projects tinged with political color, there is also the continuation of subsidies that hoped to appease public discontent.
First in the list of such undertakings is the National Power Corp.’s case where, from 2001 to 2004, the government purportedly held back the need to raise rates to prevent increases in electricity prices. Effect: the government had to shoulder P200 billion in losses.
Buying the public’s love through subsidies was also apparent in the case of the Metro Rail Transit where the operator was supposedly coerced to keep fare rates way below the actual cost.
Filipinos may now be paying once again the real cost of electricity, but MRT rates continue to be at its subsidized levels. Yet the government, being the MRT’s new owners, continues to shell out day on day millions of pesos to compensate for the continued low fares.
If the previous administration curried public favor through rice subsidies, the current bureaucracy also has its equivalent conditional cash transfer programs, i.e., outright dole-outs to poor families to encourage children to stay in school, and coupons for fuel discounts to jeepney drivers and fishermen.
These are being done in spite the fact that the current president continues to enjoy pubic support as shown through all nationwide satisfaction ratings. On second thought, had P-Noy put a cap on all state subsidies, such public support would likely have significantly been lower.
At least, as gleaned from the continued positive popularity of the current president, the money of the people used in exchange for continuing subsidies and dole-outs has not been in vain. That’s the good news.
Good and bad news in fiscal position
The bad news, especially if there is no quantum leap in the quality of governance that P-Noy’s team is committed to accomplish, is that all these subsidies and freebies will start to be a burden on the current government’s fiscal position.
The budget department seems to be doing a good job of managing funds, making sure that graft and corruption and politics does not take the driver’s seat once again through unnecessary spending.
Controlling spending is one way of extending what money is left in the national treasury for the projects that need priority funding. And in the president’s own words, he has identified some priorities: the judiciary, the conditional cash transfer program, education.
Ultimately, however, there will not be enough funds because the cost of running the bureaucracy, maintaining a democracy, and providing for just the bare minimum needs of a growing nation is much more than the money that is collected.
Relying on plugging leaks
P-Noy is hoping that the Bureau of Internal Revenue and the Bureau of Customs, the government’s main arms in raising funds for the state, will deliver the necessary finances to keep the state machinery running. But the past year’s performance does not inspire us to expect much.
The leaks in collections are not getting plugged, and it would be foolish of us to think that this would happen overnight.
The possibility of raising taxes, on the other hand, has been consistently put aside in recent months; this option has been viewed as extremely unpopular to those who guard the president’s popularity ratings.
Forked road: to tax or not to tax
In the coming months, as pressure builds up on the administration to find additional resources to provide for the basic needs of our countrymen, especially if no private business deals are clinched for big infrastructure projects, the unthinkable may have to be reconsidered.
One of the less painful taxation initiatives will have to do with increasing sin taxes, a measure that would curry favor from many sectors that find alcohol and cigarettes as undesirable habits and a major reason for rising health costs.
Higher excise taxes, which in principle penalizes only those who buy liquor or tobacco, would generate additional funds of roughly P50 billion a year that could pay for the rising health care expenditure of this nation, and perhaps with a little left over for other pressing state needs.
If there was one thing that would make sense to me in the president’s SONA on Monday, it is raising sin taxes. Aside from the many benefits that Filipinos would derive from higher-priced cigarettes and alcoholic beverages, reforming the excise tax system particularly on alcohol and cigarettes could be easily done.
Well, that’s presuming P-Noy realizes the fragile fiscal position of the government, plus that our smoking president will have the political will to make the call to remedy the problem.
