Three issues confront President Duterte. They require his urgent attention and action—one, tax reform; two, illegal drugs; and three, the now guerilla war in Marawi. By these three issues will his presidency be measured, either as a success, or as a failure.
For the long term, the most important of the three is taxation.
The Senate’s version of the Department of Finance’s Tax Reform for Acceleration and Inclusion or TRAIN has been watered down so that net tax revenues in the first year, 2018, will only be P59 billion (or 0.3 percent of the value of domestic economic output or GDP), down from P157.2 billion (or 1 percent of GDP), proposed by the DOF.
The P59 billion will not be enough to raise tax revenues as a significant percentage of GDP. The Philippine has been under-spending (for infrastructure and other essentials) by P366 billion (2.3 percent of GDP), a year. Compared to what Thailand has been spending on investment, we should be investing at least P1.7 trillion year on infra.
The original TRAIN alone, with P157-billion net increase in revenues by 2018 by the government, would have financed 108,000 classrooms, or 460,947 public school teachers, or 10,383 rural health units, or 83,143 barangay health stations, or 227 provincial hospitals, or paved 6,136 kms of roads, or rebuilt 135,000 kms of bridges, or irrigated 457,627 hectares of land. Imagine how much more brilliant, or more healthy our people would have been, or how a little more comfortable our lives would have been, with TRAIN.
The senators, of course, are politicians. To them, taxation is a bad word. Half of them will either run again in 2019 or run for president in 2022. A popular senator, Ralph Recto, was defeated after he advocated higher value added taxes (VAT).
The following senators end their term in 2019: Sonny Angara, Bam Aquino, Nancy Binay, JV Ejercito, Francis Escudero, Gregorio Honasan, Loren Legarda, Aquilino Pimentel III, Grace Poe, Antonio Trillanes, and Cynthia Villar. The following senators end their term in 2022: Franklin Drilon, Joel Villanueva, Tito Sotto, Panfilo Lacson, Richard Gordon, Juan Miguel Zubiri, Manny Pacquiao, Francis Pangilinan, Risa Hontiveros, Win Gatchalian, Ralph Recto, and Leila de Lima.
Also, people generally are averse to paying taxes. Why? Because they don’t get their taxpayer money’s worth of services. As I keep repeating, it takes days to get a birth certificate, weeks to get a passport, months to get a driver’s license or a car license plate, and forever—to travel from Magallanes overpass in Makati to Shaw Boulevard on a busy night. Why part with your money if the service is lousy?
Besides, the government already is awash with cash. The unlamented BS Aquino III presidency left the Duterte government with some P500 billion in unspent cash. The unlamented chairman of the Commission on Elections, Andres Bautista, left P19 billion of unspent money, money that cannot revert to the General Fund because the Comelec, being a constitutional body, enjoys fiscal autonomy.
But then government really needs P1.7 trillion yearly in additional money to modernize the country. Modernization takes time. The Albay airport of Joey Salceda will take 14 years to build. In certain places in Mindanao, circumferential roads take 50 years to finish. Why? Most of the money is pocketed.
TRAIN is the key measure that will convince the world that the Philippines is a serious place to do business in, that life could better for most Filipinos.
If TRAIN is not adopted almost en toto, Duterte will not be able to start or finish the 75 big infra projects under his ambitious Build, Build, Build program.
In fact, even with TRAIN approved in the form desired by the DOF, only three of the 75 infra projects will be completed during Duterte’s presidency—the Clark airport, the Clark railways, and the Mindanao railway. Majority of the 75 projects are not even backed by project studies.
Now, on drugs. President Duterte seems to be changing gears. He has stopped the increasingly notorious Philippine National Police from waging the violent war of drugs that has resulted in the deaths of at least 3,811 people (up to 12,000 according to some critics, without presenting evidence). The violence has hurt the image of an otherwise hugely popular president and made him look like a murderous despot and a habitual violator of human rights.
The war on drugs had one basic premise—kill the users and you will kill the problem. Demand side, as economists would point out. After all, the Philippines has the highest rate of shabu use in Southeast Asia.
It turns out that the problem is the supply side. This is proven by the P6.4 billion worth of shabu smuggled into the Philippines from China last May this year. The solution then is to kill the supply side. Kill the smugglers, not kill the users. Is Duterte willing to do that?
Given his impetuousness and unpredictable political will, one never knows what Duterte could do next.
On Marawi, the problem is twofold—financing the rehabilitation, estimated to be P50 billion, and waging a protracted guerilla war with the Maute terrorists masquerading as a subsidiary unit of the Islamic State of Iraq and Iran. A guerilla war will probably require an extended imposition of martial law on Mindanao island.
biznewsasia@gmail.com