AFP Scandal

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.