Pabaon at Pa-kotse

Two cases involving the military and the Church demonstrate how inefficient the government transfer system is.

Sen Teofisto “TG” Guingoina III has had a busy year. His blue ribbon committee investigated corruption in the military early this year (see my earlier post – The Game of the Generals) that led to the former Secretary of Defense killing himself (see related post – Fallen Angelo), and now at the mid-point of the year it is uncovering “nonbailable” offenses committed in the Philippine Charity Sweepstakes Office (PCSO) involving the former president.

A Can of Worms

Both cases were like opening a can of worms. The probe of the military was originally meant to focus on the plea bargain deal entered into by its former auditor Gen Carlos Garcia and the Ombudsman and led to anomalies involving dodgy financial diversions and procurement practices.

The PCSO hearings originally were meant to cover allegations that certain Catholic bishops were on the receiving end of generous SUV donations. They eventually led to the apparent misuse and misappropriation of intelligence funds approved supposedly by the former president herself.

In both situations public funds intended to provide support or assistance to the lowliest members of society (the foot soldiers and the underprivelleged) somehow found their way into the pockets of the powerful and well-connected. It shows how spending programs and projects aimed at supporting social goals (providing national security and ameliorating the plight of the poor) become “milking cows” for rent-seeking groups and agents.

Again, in these cases, two of the most venerable institutions of our society (the military and the church) have been found wanting and compromised because of actions by its most senior members (see related post – Why is the RH Bill taking so long? to see how highly rated these institutions are).

The Cross and the Sword

These twin investigations demonstrate how risky it is to look under a rock, any rock involving government transactions. One anomaly that catches your attention, when investigated further often leads to a succession of anomalies more deplorable than the first. Such was probably the plight of the Aquino administration as it settled into office.

Indeed, no institution now seems immune from guilt. Previously we had thought that our politicians and the media were in this symbiotic relationship of corruption. Now the military and the church, two institutions which preach honor, duty and morality have been found to be entangled in a web of corruption.

Given their role in our society as guardians of our physical and spiritual safety, it becomes incumbent upon them to seek to repair the damage these scandals have caused. Indeed it was when they stepped out of their traditional roles, for the military their duty to uphold the constitution and for the church to stay out of politics, that they got in entangled in this web.

The Inequitable Transfer System

But these cases merely scratch at the surface of what the real problem is. I am speaking of the inequitable system that is at work in our public tax and transfer system. The Philippines has a very high level of inequality to begin with, so one of the principles behind taxation is to promote a more equitable society. Some level of redistribution is deemed important for maintaining social cohesion and even economic growth.

Our government accounts for roughly one fifth of our overall economy. Yet when you investigate its spending patterns, you will find that a large chunk of that spending actually redistributes resources up the income ladder rather than the reverse…

  • We can look at the Philippine coco levy fund which was set up to benefit the poorest of the poor coconut farmers and how it helped one of the wealthiest members of society amasse large shareholdings in one of the biggest companies in the Philippines. Meanwhile no tangible legacy has been granted to the supposed beneficiaries who contributed a share of their crop sales into the fund.
  • We can look at the manner by which rich and middle class households benefit from the grains subsidy involving billions and billions spent each year. 
  • We can study the way commuters in the city receive public subsidy from the regional taxpayers for their daily transit to and from the city. 
  • We can have a look at our tertiary education and health spending
  • We can look at our infrastructure program. 

Indeed studies that have investigated public spending by the Philippine government have come up with very low coefficients of equity meaning that our public spending tends to favor the well-off rather than the most in need in our society.

Roots to Branch Reform Needed

That is just the spending side. If we look at how we tax our people, then we will find that the same thing probably applies. We in effect provide a lot of tax cuts to the wealthy and impose the tax burden on a very narrow base of low to middle income households.

In a separate post, I have tried to call attention to this problem, the problem of private affluence, public squalor (see a related post, Are Filipinos Over-Taxed?). How much longer can we let this inequitable situation persist?

The corruption in the PCSO and the military are merely symptomatic of a much larger problem in our society. A problem of inequity that even our government perpetuates: if we took a long hard look at the present set-up we cannot avoid but draw the conclusion, that it is time for a root-to-branch reform of our tax and transfer system.

Doy Santos aka The Cusp

Doy Santos is an international development consultant who shuttles between Australia and the Philippines. He maintains a blog called The Cusp: A discussion of new thinking, new schools of thought and fresh ideas on public policy (www.thecusponline.org) and tweets as @thecusponline. He holds a Master in Development Economics from the University of the Philippines and an MS in Public Policy from Carnegie Mellon University.

  • GabbyD

    listening to the senate hearing with the bishops…

    its clear that alot of this is blown up by the media. the crucial thing is that the media MUST be managed, IF the media DOES NOT want to play a more mature role in all of this.

  • KG

    In the past admin dinagdagan na ang layers of auditing sa afp inabolish na ang comptrollers office naglagay ng civilian etc.

    The gloria admin had the presidential anti graft commish and of course we have the coa and the ombudsman.

    With all those bodies our country was still perceived to be the most corrupt in the region.

    Now about corruption. I was reading the speeches of the reps of Nestle who happened to celebrate its 100 years in the country.
    Nestle’s Country manager said that corruption is not unique to the Philippines and it is more of a perception issue.

    The moderate the greed issue if unchecked we could have a northrailand south rail a national broadband network, modular roro terminals, laguna lake would have been dredged, naia3 could have been open years earlier,and so on.(and yes maybe a paranaque spillway)

    I guess there is nothing wrong in checks and balances as long as we don’t scare away investors and if there is a faster way to resolve issues and controversies so much the better.

    • GabbyD

      serious question: what is the benefit of having modular roro terminals?

      modular means prefabricated pieces. presumably its faster to build, and can be disassembled and re-assembled quickly.

      why would anyone want that in a port terminal?

      • KG

        So a port terminal would become a portable terminal.

        I don’t know maybe a terminal of that nature would be suitable for a seasonal huge volume of cargo and passengers.Me mga lugar siguro na minsan lang madami ang cargo at pasahero.I am just guessing.

        • GabbyD

          why would anyone want to make a terminal “portable”?

          i dont mean to attack u KG…

          but not all infra projects are good. the details are key. asking basic questions, lalo na since hindi naman MAYAMAN ang pilipinas, is very important.

          i mean, i’m sure FRANCE (where i think the tech comes from) might find portable roro’s handy — dont why tho– but one cannot just accept all these proposals as necessarily good.

          • KG

            no offense taken Gab.

            I just attempted to answer because I was the one who raised the modular roro.

            I apologize if I raised the issue of your asking questions before. I have learned to appreciate it.

            Hindi nga mayaman ang pinas kaya ayaw ng maraming local contractors ito santingin nila imbis na makatipid lalo pang lalaki ang cost.

            Was it neil cruz of the PDI who had several articles advocating for these ports?

            Sa cost palagi nagkakatalo.
            Di nga tayo mayaman sabog pa ang mga ibang program tulad ng military modernization.
            Kanya kanyang vision yung iba ambitious iba simple lang .

            Since naanggit mo na hindi nga tayo mayaman dyan papasok ang laging hinihirit ni UPN:”New taxes”

            According to Sec Carandang:

            http://www.gmanews.tv/story/214611/business/new-tax-measures-not-yet-feasible-this-year-carandang

            New tax measures not yet feasible this year — Carandang
            03/06/2011 | 03:19 PM

            As per Sec Lacierda:

            http://www.gmanews.tv/story/218783/business/lacierda-no-new-taxes-only-for-aquinos-1st-yr

            Lacierda: No new taxes only for Aquino’s 1st yr.
            04/26/2011 | 08:55 PM

  • GabbyD

    i dont understand the issue with the SUVs and the bishops.

    they were given SUVs— so what? thats not enough coz one needs to show that they used it primarily to promote themselves or their faith.

    NO ONE has proven that yet. so whats the big deal?

    even the smoking gun “bday letter”, doesnt really mean anything. i could ask my friends to donate to a charity for example, and they can consider it a gift to me.

    why isnt that ok?

    • UP nn grad

      I think what you sensed in the first 5 hours, Malacanang and rest-of-Pilipinas is realizing 5 days later.

      I suspect the PCSO was an invitation for Malacanang and Yellow-Army horde to get excited since it was a chance to make pronouncements about GuLLOO and her BFF’s while cameras roll.

      One thing now mentioned —- OFW’s do cost Pilipinas money, despite OFW’s not paying income taxes.

      I wonder if CommAudit has an audit-trail of how the blood-money payments get initiated and completed? Blood-money payments totally legit ( unlike payments to informants) so no reason for smoke-and-mirrors about the money flow.

      • GabbyD

        malacanang?

        no. the problem isnt malacanang. it the press.

        the senators (some of them) are quite balanced. they use the phrase “might” violate.

        they have nuance.

        even the current pcso board has nuance. they said the donations “might be violations” of the constitution.

        but alot of that nuance burns away by the time the news gets to it.

        its not a big deal, yet. but you cant tell that by watching the news.

        • J_ag

          So far the PCSO scandal has exposed the diversion of funds for other purposes. No smoking gun has come out directly linking the funds for the private use of GMA and her family.

          Even in the U.S. the chairman of the mighty ways and means always gets more pork for his district than the other guys.

          Discretionary power over the purse HAS ALWAYS BEEN USED FOR PARTISAN POLITICAL ENDS.

          Today large contributors (businessman) to PNoys campaign have all been given positions in different GOCC’s. Their companies almsot always have to interact with some of the same agencies or GOCC’s that now they are part of.

          But that is the very nature of big business and government.

          • GabbyD

            huh? actually, none of that was shown either.

            all we know is that there is an intelligence fund to support STL.

            whether or not it was diverted is STILL an open question.

          • UP nn grad

            So what is the definition of “diverted”? When Intel funds to support STL get spent elsewhere (say, to build a fence between farmers and hacenderos — to maintain peace, or to spend on flood relief in Tarlac or in Cagayan de Oro), is that “diverted”?

            When intel funds get spent for lawyer-fees to save some drug mules, is that “diverted”? When intel funds get spent to save a Pinay convicted of murder in the Middle East, is that “diverted”?

          • GabbyD

            again, there have no reports that the intel funds have been diverted.

            lets NOT make things up.

          • UP nn grad

            Ang Inquirer kasi, eh, kung anu-ano ang binabanggit tungkol kay Foreign Affairs Undersecretary Esteban Conejos Jr.

            http://globalnation.inquirer.net/5628/dfa-confirms-pcso-paid-p15-m-%E2%80%98blood-money%E2%80%99

        • GabbyD

          ok. up.

          where is the word “diversion” in that link?

          ugh…

          • UP nn grad

            apparently, what GuLO did — to move intel funds from PCSO-budget to DFA-type activities — is legitimate and is not in way to be called illegal diversion of funds.

            So the huffing and puffing by Yellows suggesting GuLO and her BFF’s were playing hocus-pocus may be misplaced. At least for this particular instance. Maybe. Who really knows. Pero best friends pa rin daw Malacanang and CBCP.

            Tama ba, bert?

          • J_ag

            PCSO funds are off budget state funds. The President has wide latitude in diverting/reallocating
            public funds.

            The Chief Executive has wide latitude over this off budget purse…

            There is no plunder in this transaction. If there are not fast and straight rules on what the President can and cannot do with these funds there is no irregularity.

            Labeling it intelligence funds was a serious mistake to prevent disclosure.

            Can anyone tell me how the CCT is going to be monitored and who are to be included and excluded?

            Now this WB sponsored program funded by loans is being put forward as a major accomplishment. It will take a generation to see the effects of this program. By the time the next President comes around chances are the program will be altered or scrapped to come up with a new pork system.

      • Bert

        Wow, UP n, you’re so hot on taxing OFW because of blood money paid to those who were involved in crimes and you say the diversion is legit and yet you’re so mum on the other diversion which was so much millions more diverted to the former officials’ very deep pockets, and why is that? You think it’s legit, too?

      • Bert

        UP n,

        Why should you confined the excitements to Malacanang and to the Yellow Army with regard this PCSO anomalies? Are you sad? Don’t you want to know who stole and pocketed government’s money, your money?

        • UP nn grad

          I told yahhhh already… best accomplishment in PresiNoynoy’s first year was Presi-Noynoy pushing for EO-one to convict GuLO based on Presi-Noynoy and BFF-circle having decided — GuLO:GUILTY.

          • GabbyD

            omg. you are crazy. i dont understand people like you. how can you say these things with a straight face?

          • UP nn grad

            come on, gabbyD.

            You still saying that Presi-Noynoy did not enter Malacanang already with a belief that GMA is guilty???
            That’s why he was voted in by ManuB and bert.. ( while of course, some Yellows voted him because he was a magnificent senator son-of-Cory.)

            EO-1 was the engine to find out on what charges GuLO can be convicted of.

        • UP nn grad

          It can’t be because he was a super-accomplished congressman or senator that Presi-Noynoy stepped into Malacanang.

          Presi-Noynoy did campaign on pushing immediately for Freddom-Information and Repro-Health, but that is not why bert elected . Heck, Yellow’s main push against Villar was Vill-AA–RR–OOYYYYOOO.

          GMA-talsik-diyan!!! The guilty of the past
          9 years, we know who they are — they should head to jail!!! You think bert, cocoy, ManuB, leytenian, KG and the Pilipinas Supreme Court didn’t know what EO-1 was all about?

          • Bert

            The issue here, Up n, is not Noynoy anymore. The issue is you, the reason why GabbyD reacted the way he did. There is an ongoing investigation of the PCSO mess, and it seems you’re not happy it’s being done, thinking that only Malacanang and the Yellow Army should be excited by that PCSO investigation even if it will tell you who stole your money.

            Your feeble attempt to defend the thieves was what irked GabbyD, and who would not react to such nonsense as blaming the OFW for Gloria’s diversion of government money to pay blood money to those who were accused of crimes then as punishment you wanted to tax OFW for that.

            Maski sino naman magagalit, ‘di ba?

          • UP nn grad

            So blood-money was paid so the murderers can be “forgiven” and they can return to Pilipinas. Did you know that the ones they killed were their workmates — OFW’s had killed OFW’s for which GMA had thought it A-okay to have blood money paid to the OFW relatives here in Pilipinas.

          • UP nn grad

            bert: I don’t think you and gabbyD on all the many facets of about the PCSO miasma. For example, I thought GabbyD is one (if you read his earlier blog comments) who wonders why so much blabber and innuendos about donations to bishops.

          • Bert

            wala lang ito, nangungulit na lang ako, pero, para mas malinaw ay ito: Blood money was paid because your GMA had decided it’s A-okay to divert government/PCSO money, P20 millions in all including patong, to spend for people who killed and mutilated their countrymen abroad.

            Mas malinaw, ‘di ba?

          • Bert

            and, just in passing, UP n, noticed that up to the last minute your feeble defense of GMA your saying she paid the blood money for the relatives of the victims when the blood money was in fact intended for the safety of the people who killed and mutilated their countrymen abroad.

            A-okay and wise decision indeed. P20 million and that’s a lot of money needed by the good people of the PHILIPPINES, our people.

          • UP nn grad

            There it is again —- different folks, different strokes. Your understanding and my understanding of blood money — they differ..

            Different folks, different strokes.

            Just like you and gabbyD may have different thoughts about PCSO money for blood money — was it diversion?

    • GabbyD

      in an interview in GMA7, sen guingona jr said that this PCSO donation thing is WAY WAY overblown.

      i agree.

  • J_ag

    “We know now that Government by organized money is just as dangerous as Government by organized mob.” FDR

    The first words out of Sec. Roxas lips after assuming the DOTC post is to review whether to privatize MRT and LRT 1 at all. What is going on?

    • Another case in point here of regressive transfers where regional taxpayers are subsidizing urban commuters. Govt takeover happened because the private operator could not operate under the subsidy arrangements. The subsidy under Erap became worse under Gloria. If the govt is not prepared to privatize it yet, then it means it intends to continue with the subsidies.
      One of the PPPs was meant to transfer operations and management to a private firm. The problem as I figured with DOTC coming under a politician is that populist policies could become a big temptation.
      PNoy reduced the subsidies somewhat–a half measure, when a full measure would have been better. It would have entailed taking away the full subsidy as a general rule and allowing targeted concessionary rates for students, the elderly and CCT recipients. Charging extra for peak hour travel and lower rates for off-peak travel.

      • J_ag

        The Cusp is causing confusion to the confusion. The MRT line is owned by private interests. Since the start the operations and maintenance are handled by the DOTC. Maintenance in fact is contracted out to a Japanese from by the DOTC. Government would want to bid that out. Metro Pacific owns a controlling interest in the ownership of the line.

        Naturally being the private equity group of the Salim they would want to improve the services while asking the government to raise rates to almost double what it is today.

        In a primarily feudal society where we elect our autocrats every three years one should forget about long term plans .

        Roxas has long been known as a panderer to populism.

        Rates should be doubled and more rail cars should be bought.

        The owners have a take or pay provision in their original contract. Hence the government is forced to pay for the shortfall in revenues. .

        One of the greatest flaws in the BOT or in the upcoming PPP is the determination on how much should the rate of return on investments and equity be?

        The idea that there are no implicit or that matter explicit guarantees is totally false. All these projects carry with that guarantee.

        Spoke to the guys at NEDA AND THEY FEEL THAT RATES OF RETURN ON CAPITAL SHOULD BE NO MORE THAN 5-6%.

        The private sector would want double that and even higher.

        Please note that almost all projects are funded by leverage of debt over equity of 80/20.

        Forex cover are part of the guarantees.

        Any student studying to be an investment banker will tell you that proponents can securitize future earnings and hence these are highly leveraged propositions.

        Most especially where a large part of the global economy is caught in a liquidity trap.

        Private sector would kill for a take or pay project (guaranteed ROE of 12%+) in a world starved for yield.

      • Didn’t the Land Bank and the DBP purchase a majority stake in the MRT-3 line? Is that not why the govt now has the right to privatize the operations and maintenance of the LRT/MRT to begin with, the fact that they own it or at least hold majority stake?

        My point was that privatization can only work if the private operator will be allowed to increase fees (the final decision will still be up to the govt), which if it is done will impact the poor, elderly and student riders more severely. If not, then it means govt will have to keep subsidizing it. So the govt will make 15 billion from the 4-year contract but could be paying 7 billion in subsidies every year. It doesn’t add up.

        Whether the govt or a private firm operates the LRT/MRT line, the issue of regressive income transfers has to be addressed. To wit, I was proposing some ways to deal with it that were more equitable and at the same time efficient. I admit I wasn’t as clear as I could have been at first. I hope this has dealt with the confusion.

  • The problem here is that someone has conflated the timing with the structure. I was making a point about the structure, but he was tying it back to timing. The structure is not PNoy’s fault, but rather a legacy of history.

    Case in point is our health system which is like a user contribution model. In Australia, there is no separate collection for health like PhilHealth. Health expenses are taken from the general pool of taxes and spent on individuals regardless of their contribution. In fact Australia is notable for the fact that much of its social spending is income or means tested. Our public and private Philhealth accredited hospitals are accessed mostly by the well-to do, while primary health care is accessed mostly by indigents. Devolution was used as an excuse to pass on the cost of the latter to LGUs. That is one example of historical legacy. Not PNoy’s fault, but if he does not correct it, it becomes part of his legacy.

    The reduction of farm to market roads and irrigation expenditures is a structural decision made by PNoy, which I think we can consider regressive. The sanitation spending he increased is considered progressive though. So there are pluses and minuses here.

    Now let us address the problem of timing which is being made the bone of contention here. If expenditures are regressive to begin with, then the timing doesn’t matter. If they are progressive, then timing becomes important as delaying it will hurt the poor.

    I think the declining popularity of PNoy (his net satisfaction rating has gone below 50% for the first time) is a combination of many factors, not least of which is his government’s execution of the budget. An impression is circulating that the point of the fiscal restraint is not to eradicate corruption, which is continuing, but that it is being taken away from Arroyo’s clients. Foreign govts in particular may feel that this is the reason behind the cancellation of ODA contracts. If that impression is confirmed then it will lead to further erosion of the legitimacy of reforms.

    We have to consider what we mean by good governance. Is it good governance to fail to manage and execute your own budget? From the DBM’s report it seems that the regional offices are wagging the central offices. Is it good governance to maintain a regressive tax and transfer system? Is it good governance when you commit to inclusive growth, but the kind of spending you undertake is not?

    • UP nn grad

      Apparently to a few members of Yellow Army, delay (cancellation, then replacement with “different”) is good governance even if the benefit shows up a decade later (if at all) ……. as long as retribution — running down and extracting a kilo of flesh out of Arroyo BFF’s — is demonstrated early..

      • Yes, UP nn grad, I think the idea that for a govt to be good, it just has to not be evil is misguided. For a govt to be good, it apart from avoiding evil, needs to disavow bad policies.
        So I think this is where the govt needs to lift its game in the coming year. Many poor or regressive policies inherited need to be re-examined, discarded or reformed.

  • Bert

    “…if we took a long hard look at the present set-up we cannot avoid but draw the conclusion, that it is time for a root-to-branch reform of our tax and transfer system.”-Doy

    I think that that is just a matter of opinion without much leg to stand on, I’m sorry to say, Doy.

    The coco levy fund was manipulated by the greedy operators to suit their self-interests and so has nothing to do with the problem of tax and transfer system. If the manipulator were not so greedy it could have benefitted the supposed beneficiaries even given the same system. Others, for example the infrastructure program, could benefit the bulk of their intended purposes if the funds were not stolen and pocketed through graft and corruption. Same goes with the other examples you mentioned. Therefore, the root to branch distribution system is not so much the problem as it is the greed of the people handling the system.

    That’s why this noble intention of this present government to run a good and clean governance has to be helped and encouraged instead of maligned.

    • UP nn grad

      bert: so your premise is that tax-increases are not needed — not this year, not next year, not the year after — because Presi-Noynoy wlll be able to retrieve hundreds of billions of pesos from GuLO and her BFF’s? Or do you have to add that you also believe that there will be zero “paki-tabi ng milyones… heh heh heh” graft-corruption in the Noynoy administration to the tune of billions of pesos.

      Remember that Paranaque Spillway alone needs P20Billion pesos at least. Have you seen any estimate for how many hundreds of millions needed to upgrade Pilipinas elementary- and high-schools to become at least 80% as good as Thailand’s?

      And again… so walang graft-corruption in Noynoy administration, is this what you believe will happen in 2012, 2013, 2014, 2015, 2016?

      • UP nn grad

        I wish PresiNoynoy and Heidi the best, but 15%-reduction of graft is a superb accomplishment… 40% reduction is fantasy. Even if it were Saint Cory running herd over Pilipinas governance and all her cabinet members are clones of Presi-Noynoy.

  • MB, I fail to see how scrutinizing contracts entered into by the previous government leads to increased welfare to the poor necessarily. I mean it may lead to savings, but if those savings are being used to artificially achieve a budget surplus, rather than for pro-poor spending then it won’t improve their plight. I think it remains to be seen what the administration will do.
    Secondly, I have given unreserved praise to PNoy for expanding the CCT which targets the poor, but as the first quarter results show, the DSWD was behind in their spending program. Nevertheless, I gave him credit there when his budget came out.
    Thirdly, I also gave him credit for his education spending. Many criticised him for capping the growth of tertiary education spending, but as studies have shown spending there tends to be regressive while primary and secondary education spending is progressive. It has become a bit less progressive last decade because of increased secondary spending when it became universal, but his emphasis on Kindies helps to address that.
    Fourthly, neither Diokno nor I prioritize tax reform over spending reform. We see them both going hand in hand. We can be both a low taxing economy as well as a more egalitarian one if the actual spending we made was more progressive. As it stands, both our tax and spend might be regressive. So what it means is that taxes have to be reformed, spending too.
    Finally, we need to examine both sides of the coin. Removing tax loopholes doesn’t necessarily mean raising tax rates (in fact, quite the opposite, we can flatten the rates by expanding the base). There can be spending restraint, but not on the scale undertaken these past few months. What we learnt from the 1980s with structural adjustment is that if the pain of reforms undermines the legitimacy of those reforms in the eyes of the people, then it is perhaps not worth imposing too abruptly.

    • manuelbuencamino

      Doy,

      Have you seen the latest numbers on CCT? Of course the first quarter numbers were slow. The program was just getting started. GMA’s shit rolls had to be cleaned up first. But now it is picking up steam and should reach 90 percent of projections by the time the new budget is presented. I think BSA’s one year CCT will match what took three years for GMA to reach. How about the employment numbers? And the hunger numbers from SWS?

      The savings on the contracts and GOCC salaries were spent on worthwhile projects like much-needed housing for the military, among other things. Don’t soldiers need housing too?

      “neither Diokno nor I prioritize tax reform over spending reform.”

      Diokno wrote that BSA was spending too much time on reform. He said BSA should start spending. But BSA believes that spending without making sure they went to the right place is a waste of money. So there you have a philosophical difference and we will know who is right only after time passes.

      How is the spending program being pursued by BSA regressive? Is he spending on the wrong things?

      “What we learnt from the 1980s with structural adjustment is that if the pain of reforms undermines the legitimacy of those reforms in the eyes of the people, then it is perhaps not worth imposing too abruptly.”

      We are not talking about structural adjustment here. BSA is simply reviewing contracts before spending. I don’t follow your logic, how can wasteful spending reach the poor? How can the legitimacy of reform be undermined when the poor can see that the crooks are not getting their hands on the money?

      See that’s what bothers me about Diokno’s perspective. In effect he is saying that leakage is okay. But there’s nothing that undermines legitimacy more in the eyes of the poor than to see some s.o.b. getting a cut from a project meant for them.

      “Removing tax loopholes doesn’t necessarily mean raising tax rates (in fact, quite the opposite, we can flatten the rates by expanding the base). ”

      Yes, BSA’s economic team is reviewing tax loopholes. It is looking for ways to raise revenue without raising taxes and for ways to improve collection and to spend efficiently so that taxes are not wasted.

      I have often wondered why GMA needed to impose VAT and at the rate she did when she did. Why did she impose VAT when she did? Was it not needed before the 2004 election? What happened between 2001 and 2004 that all of a sudden she needed the VAT? Did she mismanage the economy during her first three years? Or was it because she looted the treasury to finance her campaign? Was it because collecting VAT saved her the trouble of reforming the customs and the BIR to increase collections?

      • UP nn grad

        Malacanang had a show-and-tell to announce that a the family of a schoolgirl from Patikul, Mindanao is the 2,000,000th beneficiary of CCT. Also that the goal is to add 300,000 more names to the list of beneficiaries.

        Also noteworthy — Malacanang’s announcement on how many names had already been removed from the 4P-list they inherited from GuLO.

        • UP nn grad

          Not mentioned during the Malacanang ceremonies. . . . that CCT-Noynoy Administration is powered by ADB and World Bank loans, and that the debt repayments will start after Presi-Noynoy has left office.

          For example, the $400-million ADB loan needs to be repaid in 20 years (w/ a five-year grace period). The government will have to start paying the ADB loan in March 2016 and continue to do so twice a year until September 2035.

          click below for a PCIJ thought-piece — can CCT be a debt-trap?

          http://pcij.org/stories/cct-debt-trap-future-of-pro-poor-deal-a-poser/

      • VAT is indeed regressive, but the reason why it had to be imposed in the first place was because the govt was not getting enough from direct taxes, income taxes, and because it is easier to administer VAT.

        Make no mistake about it, if we reformed income taxes by flattening the tax rates and expanding the base, there will be some in our society who will view it as a tax increase as they are presently not paying taxes.

        The rationalization of fiscal incentives which only affects corporate income is but one half of the pie, the other is a reform of personal income taxes which is yet to be considered by this govt.

  • manuelbuencamino

    “it is time for a root-to-branch reform of our tax and transfer system.”

    That’s exactly what the Aquino administration is trying to do. That’s why I don’t say it is focusing too much on scrutinizing contracts entered into by the previous administration and fault it for “slow” spending.

    I guess like Diokno you prioritize reforming taxation over reforming transfer that’s why you criticize his approach as going ass-backwards.

    The Aquino administration believes that prioritizing the reform of transfer not only reduces the need for more taxes but also makes for a more just society. If that is ass-backwards then so be it. But the Aquino administration believes that even moderate greed has a price that will eventually have to be paid for through more taxes.