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The Tough Tasks of 2010-2016: We Will Rise to the Challenge

Senator Noynoy Aquino has emerged as the people’s candidate. That he has made the accountability of Gloria Arroyo and her regime a central plank of his program boosts his position as the most suitable to preside over the next administration. We have identified Arroyo’s illegitimacy, plunder, and destruction of institutions as the main obstacle to our country’s progress.

The mission for the next six years is gargantuan. The next President carries the responsibility of resuscitating our institutions of democracy, transparency, and accountability from the vicious blows inflicted by Arroyo. But to get there, Arroyo’s forces must first be overcome. This will not be easy, given the state machinery that Arroyo commands.

This is where the candidacy of Noynoy Aquino finds relevance. By far, he appears most capable of generating the broadest coalition that stands the best chance of defeating the vilest, most dangerous enemy.

Noynoy’s democratic credentials have deep roots. He is personally closest to the legacy of Ninoy and Cory Aquino, two Filipinos to whom people and country mattered most. Noynoy, as he proclaims to continue the fight of his parents, resonates as well the people’s unfinished fight for democracy and decent governance. He also lays claim to a moral uprightness that the likes of former president Joseph Estrada cannot hope to match.

Moral uprightness and the fortitude to fight for people and country – nothing less is needed to be up to the daunting tasks of 2010-2016.

To be sure, most aspirants to the presidency will put forward their respective platforms to address the most critical development challenges for the next administration. We offer below a focused program.

Taxes in the Philippines

Half of the population of the Philippines live in poverty. If
multinationals were to pay the correct amount of taxes, the Philippines
government would have more resources to help people like Wilson Manuba,
a disabled fisherman who isn’t getting the medical care he desperately
needs to treat his life-threatening illness…

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This video was produced by Christian Aid. The key informants for this video were Undersecretary Gil Beltran of the Department of Finance and Filomeno Sta. Ana III, the coordinator of Action for Economic Reforms.

Failing State and Governance Deficit

A recent paper by Prof. Fernando Aldaba entitled “Poverty in the
Philippines: causes, constraints and opportunities” presented at a
recent workshop at the Asian Development Bank provided a detailed and
insightful story of the extent and depth of poverty in the country and
its causes. It is a sad tale relative to the success of some countries
in the region in releasing millions of people from the poverty trap.
In the past three decades Malaysia and Thailand have almost eradicated
poverty while the Philippines seems to have fallen even deeper into
poverty. What is very disturbing is that at least half of poor
households are “already mired in chronic poverty” with little hope of
getting out of the mire.

Consider the following statistics provided by the author:
• Historical poverty: From 1985 to 2000, poverty was reduced at a
snail’s-pace rate of 0.7% per annum. There were 4.2 million more poor
people in 2000 than there were in 1985.
• Current poverty profile- 2000-2006: Poverty incidence among households increased from 24.4% in 2003 to 26.9% in 2006.
• Subsistence poverty: The number of food-poor Filipinos reached 12.2 million in 2006, almost 15% of the entire population.

Finding the Right VAT Rate

Value-added tax (VAT) for many is considered to be the best form of
general indirect consumption tax. VAT is an indirect tax, in that the
tax is collected from a person or entity that does not bear the entire
cost of the tax. It is levied on the added value that results from each
exchange in the process of delivering a final product to the consumer.
To avoid double taxation on final consumption, exports (which by
definition, are consumed abroad) are usually not subject to VAT and VAT
charged under such circumstances is usually refundable. It differs from a sales tax because a sales tax is levied on the total value of the exchange. For this reason, a VAT is neutral with respect to the number of passages that there are between the producer and the final consumer.

Whether the VAT is the best way to respond to a shortage of revenue is widely debated. In the Philippines, serious questions about sufficient collection, administration, applicability, and impacts, especially on the poor, have all fueled a myriad of views on the subject. To add to this, serious reservations of tax policies in general arise through criticisms about the lack of integrity within the government. Recent tax reforms in the past few years, including exigency measures of expanding the VAT base to include petroleum and other energy products as well as selected services (EVAT) and increasing the VAT rate from 10 percent to 12 percent (RVAT) have been especially controversial given recent increases in the prices of certain commodities.

Global Collective Action

Leaders of developed and developing countries all recognize the need for collective action to tame the worldwide recession.

But collective action is easier said than done. Protectionism is tempting as jobs and incomes at home are vanishing.

Topnotch economists, including Federal Reserve chair Ben Bernanke and Barry Eichengreen (University of California, Berkeley), say that mercantilist policies during times of world recession did work. See for example Bernanke’s Essays on the Great Depression (2000) and Eichengreen’s Golden Fetters: The Gold Standard and the Great Depression, 1919-1939 (1992).

Fiscal Stimulus and Global Collective Action

Let’s face it: The Barack Obama stimulus plan by itself will not lift
the US from the recession in the quickest and most decisive manner.

Some quarters—Paul Krugman, for example—have doubts about the
effectiveness of the stimulus plan. Krugman criticizes the stimulus
plan for lacking boldness as well as for being incomplete and
inadequate.

But let us assume that the Obama administration will take heed of
Krugman’s advice and adopt his more aggressive proposals. Will that
lead to the definitive stimulus?