Thursday, September 23, 2004
The Spirit of the Season
Am I missing something here? Four months ago, before the election, the Arroyo administration was the only choice the people really had because the path it had taken for the country was correct and would lead to prosperity.
Today “The Philippines risks a "painful economic death" within two years unless Congress and the people agree to raise taxes, President Macapagal-Gloria Arroyo warned Tuesday. In a statement printed in the Philippine Star newspaper, the Filipino leader urged the country to "suffer the pain now and experience the gains two years hence (rather) than postpone the pain and die a painful economic death two years from now."
One of two things is true. Either I have been in a coma since April and something very dramatic has happened since then that I am not aware of, to lead the nation on a path to “economic death”. Or every word this administration said prior to last week was political rhetoric AND its policies have brought the Philippines to the brink of disaster.
I must not have been asleep because I have been telling you since at least April, that the country was facing “economic death”.
President Arroyo is placing the hope of salvation for the gross misjudgment and mismanagement by her administration in handling its economic affairs on the raising of new taxes. She has certified as urgent the passage of bills that will supposedly accomplish that task. In a show of unity with the administration’s belt tightening (and such a fat belt it is), Congress will at least publicly give up its ‘pork’. Further, to encourage acceptance of these new taxes, government ‘fat cats’ will give up lavish lifestyles and high salaries. Even private functions held at public venues like Malacañang will be paid for and not charged to the national treasury.
In return for all the cost cutting, new found efficiency, and selfless sacrifice by the government for the singular benefit of the people, the citizenry will rise up in EDSA People Power unity and cheerfully crush the demon of ‘economic death’. There is a new and glorious spirit in the air.
That is the spirit of Taxpayer Revolt.
In case no one in Malacañang had noticed, let me be the first to point out that Filipinos are not the most enthusiastic tax payers in the world. Low tax compliance in the Philippines however, is not unique. Every country suffers from the problem although here it is nearly the equivalent of buying a lotto ticket: almost everyone does it and it is only a matter of how much and how often.
So before you propose a tax, you ought to know why people do not pay taxes properly and what kind of tax you can pass to collect revenue.
The last recipient of the Jan Francke Tax Research Award (a Professor Bloomquist), which is a big deal and EVERYBODY who is a trained economist knows about it, wrote a paper about tax evasion. The short story is this. People who make a lot of money and people who make only a little money cheat the most on taxes. Also people do not pay taxes 1) if they think the tax is unfair, meaning targeted only at them and 2) if they do not think they are getting anything for their taxes.
Well on number two above, the President’s tax proposals are dead meat. President Gloria has raised the government debt way beyond anything imaginable in the last fifty years and the average person cannot see anything for that money. Even if you go to her website and add up all the money she spent on all her wonderful government programs, the taxpayer did not get value for payment. And as Professor Bloomquist found out, guess what, people are not so stupid to willingly pay taxes and have the money wasted.
The idea of income disparity is a little more interesting when applied to the Philippines. The populace has been so bombarded by the politicians with the idea that we are a “poor” nation that it has become part of the national psyche. Anyone who has traveled around the world knows what real and extreme poverty is and the Philippines does not qualify. When jeepneys carrying vegetables and trucks carrying pigs to market require armed escort, then we qualify. However survey after survey shows that the average tax payer, even the wage earning, car owning, mall shopping person considers themselves, if not poor, at least near the bottom of the economic ladder. And guess what, it is the people near the bottom that do not pay taxes.
Sure, the government can impose taxes in a way to directly target the “middle class” like on gasoline and the like. But then two things happen. It is perceived as ‘unfair’, prompting more evasion somewhere else and when avoidance is impossible, people will demand proof that the money was not wasted.
A taxpayer revolt can be an ugly creature. Its fury can transcend even movements against corruption, abuse, or injustice. And more governments and leaders have been toppled (through constitutional and unconstitutional methods) over taxes than for any other reason.
Today “The Philippines risks a "painful economic death" within two years unless Congress and the people agree to raise taxes, President Macapagal-Gloria Arroyo warned Tuesday. In a statement printed in the Philippine Star newspaper, the Filipino leader urged the country to "suffer the pain now and experience the gains two years hence (rather) than postpone the pain and die a painful economic death two years from now."
One of two things is true. Either I have been in a coma since April and something very dramatic has happened since then that I am not aware of, to lead the nation on a path to “economic death”. Or every word this administration said prior to last week was political rhetoric AND its policies have brought the Philippines to the brink of disaster.
I must not have been asleep because I have been telling you since at least April, that the country was facing “economic death”.
President Arroyo is placing the hope of salvation for the gross misjudgment and mismanagement by her administration in handling its economic affairs on the raising of new taxes. She has certified as urgent the passage of bills that will supposedly accomplish that task. In a show of unity with the administration’s belt tightening (and such a fat belt it is), Congress will at least publicly give up its ‘pork’. Further, to encourage acceptance of these new taxes, government ‘fat cats’ will give up lavish lifestyles and high salaries. Even private functions held at public venues like Malacañang will be paid for and not charged to the national treasury.
In return for all the cost cutting, new found efficiency, and selfless sacrifice by the government for the singular benefit of the people, the citizenry will rise up in EDSA People Power unity and cheerfully crush the demon of ‘economic death’. There is a new and glorious spirit in the air.
That is the spirit of Taxpayer Revolt.
In case no one in Malacañang had noticed, let me be the first to point out that Filipinos are not the most enthusiastic tax payers in the world. Low tax compliance in the Philippines however, is not unique. Every country suffers from the problem although here it is nearly the equivalent of buying a lotto ticket: almost everyone does it and it is only a matter of how much and how often.
So before you propose a tax, you ought to know why people do not pay taxes properly and what kind of tax you can pass to collect revenue.
The last recipient of the Jan Francke Tax Research Award (a Professor Bloomquist), which is a big deal and EVERYBODY who is a trained economist knows about it, wrote a paper about tax evasion. The short story is this. People who make a lot of money and people who make only a little money cheat the most on taxes. Also people do not pay taxes 1) if they think the tax is unfair, meaning targeted only at them and 2) if they do not think they are getting anything for their taxes.
Well on number two above, the President’s tax proposals are dead meat. President Gloria has raised the government debt way beyond anything imaginable in the last fifty years and the average person cannot see anything for that money. Even if you go to her website and add up all the money she spent on all her wonderful government programs, the taxpayer did not get value for payment. And as Professor Bloomquist found out, guess what, people are not so stupid to willingly pay taxes and have the money wasted.
The idea of income disparity is a little more interesting when applied to the Philippines. The populace has been so bombarded by the politicians with the idea that we are a “poor” nation that it has become part of the national psyche. Anyone who has traveled around the world knows what real and extreme poverty is and the Philippines does not qualify. When jeepneys carrying vegetables and trucks carrying pigs to market require armed escort, then we qualify. However survey after survey shows that the average tax payer, even the wage earning, car owning, mall shopping person considers themselves, if not poor, at least near the bottom of the economic ladder. And guess what, it is the people near the bottom that do not pay taxes.
Sure, the government can impose taxes in a way to directly target the “middle class” like on gasoline and the like. But then two things happen. It is perceived as ‘unfair’, prompting more evasion somewhere else and when avoidance is impossible, people will demand proof that the money was not wasted.
A taxpayer revolt can be an ugly creature. Its fury can transcend even movements against corruption, abuse, or injustice. And more governments and leaders have been toppled (through constitutional and unconstitutional methods) over taxes than for any other reason.
// posted by john mangun @ Thursday, September 23, 2004 
