Saturday, July 19, 2008

"Brouhaha" over E-VAT on Oil and Derivative Products

Given the escalating prices of products and services triggered by the pump-price of gasoline and petroleum-based fuels, the Filipino People is bombarded with a barrage of pronouncements and counter-assertions regarding the Extended Value Added Tax (E-VAT). I do not wish to engage in polemics solely on such a hotly-contested controversy: the Expanded Value-Added Tax that was prescribed by the World Bank and major international creditors to be adopted by the Philippine Government. From where I am looking right here in Metro Manila, I am inclined to look at the "brouhaha" being played out in tri-media and cyberspace as just a "zarzuela con moro-moro" engaged in by all the active players in the present political stage for their own respective reasons and objectives. However, there is a lack of intelligible information for the majority of the Filipino citizenry to have the proper appreciation of the present situation and make a proper evaluation of the available alternative methods to solve the "problem/s" at issue.

What I recall is that there was "faulty implementation" of the original VAT law in 1998. With the hasty implementation of the original VAT law, there was need for a remedial measure which was the E-VAT law. However, instead of solving the "faulty implementation", the supposed to be remedial measure exacerbated the "price-escalation" impact of taxation on Filipino consumers.

To me, the problem analysis should not start with whether or not the E-VAT law should be suspended temporarily or rescinded permanently. At my end, proper problem analysis must start with the basics regarding the following:

  • consumption patterns of Filipinos in the 7,107 islands of the Philippine Archipelago;
  • the cost-price ratios of the "basket of goods and services" needed by an average Filipino household of five (5) members [parents and 3 children] for a decent standard of living with consideration of the income differential between urban and non-urban areas;
  • the estimated aggregate of revenues needed for the minimum National Budget;
  • all sources of revenues for the National Government for the minimum National Budget;
  • details and aggregate of the items that are over the minimum National Budget, which will have to be dealt with as distinct and separate items to be eliminated, if warranted

In short, the starting point should be a stringent evaluation of the fiscal management by the Philippine National Government for the past 10 years, i.e., since 1998.

I am not among those who subscribe to the need of the Philippines for a good credit rating with international creditors and credit agencies. All the more that I do not subscribe to the possibility of a financial disaster for the Philippines from a downgrading of its credit rating. Personally, I would like to see how the international credit community will deal with a Phil. President who will go for the lowest credit rating that can be given to the Philippines in order to stop foreign borrowings, at least for the next six (6) years using the 6 year term for the President of the Philippines without any re-election, as reference.

From where I am looking, Gloria Macapagal Arroyo is already a TOTAL FAILURE as President of the Philippines for the past seven (7) years: from January 2001 up to December 2007. The only reason why she is still in Malacanang is simply because the Armed Forces of the Philippines and the Philippine National Police, as controlled by a group identified to be with ex-President Fidel V. Ramos, have yet to withdraw their support from her.

Based on what I have come to understand about the fiscal and monetary management done by the past administrations, from the Revolutionary Government of Corazon C. Aquino, to Fidel V. Ramos, and Joseph Ejercitor "Erap Estrada", to Gloria Macapagal Arroyo, from January 2001 up to 30 JUNE 2008, what is needed by the Philippines today is an objective analysis of the total revenue sourcing vs. total expense requirement of the National Govt. And the E-VAT law issue is just a part of the whole caboodle.

Regarding the immediate concern on escalating price increases for products and services, aside from temporary suspension of specified taxes (in short, not just limited to E-VAT), there are other remedial measures that the National Government can resort to. Top of the list in my book is "price control" for the "basket of food" for the table of the average Filipino household and utilities: fuel, electricity and water. Another is increasing the maximum amount of household income to be exempted from income tax. Another is increasing the maximum amounts to be allowed as deductible expenses from the Gross Income to derive the Taxable Net Income, that should be applied to both fixed income earners and non-fixed income earners. Another is to consider premium payments for all types of insurance, including pre-need plans, as allowable deductible expense. Another is reducing the final tax on interest earnings of bank deposits from 20% down to only 2%. Those are just few of the many possible angles which can be explored for easing up the pressure of inflation and taxation on Filipino consumers.

Moving on to the jumbo items:

Although I have not joined the "Freedom from Debt Coalition" (FDC) of the Philippines, as a Filipino citizen I do not approve of the "Automatic Debt Servicing Provision". I therefore support the clamor for the repeal of the Automatic Appropriations Law on Debt Servicing, now contained in Section 26 (b) Book 6 of the Revised Administrative Code of 1987 or the automatic appropriations law on debt servicing (formerly PD 1177). It is one of the main reasons why the Philippines is in such a debt debacle. That law provides the institutional and legal mechanisms that dictate and aggravate our reliance to more borrowings to pay our debts. This insanity must be stopped as soon as possible.

If ever I will become involved in the operations of the National Government of the Philippines as a consultant, I would like to be assigned to the "Commission On Audit". Personally, I believe that "Foreign Debt Audit" is the first step to free us Filipinos from the bondage of Foreign Debt. I believe that "Foreign Debt Audit" is both a political tool and a process that must be exercised and used to fundamentally disentangle the web of foreign debt thread by thread --- to scrutinize the historical context and events why the Philippines ended up with such a foreign debt quagmire. What is so horrible is the "cover up" being perpetrated by those who are holding onto the power in both the Executive and Legislative Branches of the Philippine National Government.

What should happen after the Foreign Debt Audit by COA? We can pursue that when the more opportune topic will arise.

No comments: