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Editorial
N. Perlas, 27 November 2004
This week the political beat centered around the question of tax reform. The
Arroyo administration wants to increase tax measures in order to reduce the
fiscal deficit of the government.
In any normal operation, one has to increase income in order to avoid
bankruptcy. But the Philippine government is anything but normal. It has a deep
credibility and legitimacy crisis. It is riddled with problems, with
inefficiencies, lack of focus and vision, and most of all, plagued with
corruption. Would you willingly give more money to somebody knowing that you
will never be fully served and that money will only go to more and the same
corruption?
Just this week, BusinessWorld reported that the Department of Budget and
Management calculated that almost P400 billion pesos of the budget government
budget is lost through corruption. Almost half of the government budget is lost
through corruption. So unless the government radically addresses the problem of
corruption, then we should expect almost half of the income generated by the new
tax measures to be lost to corruption.
Just think of the now so familiar stories. Customs officials pocketing a large
share of customs duties. I know. They tried to squeeze blood money from me. That
is, until I showed them the true custom duties for the goods I was importing by
citing the appropriate law.
Or just think of your newly constructed highway. After a few years and close to
a billion pesos later, half of the road is destroyed because contractors did not
follow the technical specifications for the road. Instead they paid a share of
the budget to a key government official whose signature would mean money for
them.
Through these and other similar stories, our country has earned the dubious
distinction of being one of the most corrupt countries in the world, number 11,
to be exact. Yet, this is only part of the picture.
Many corporations are not paying their taxes. Estimates range to a low 40% to a
high 68% of corporations not paying their taxes satisfactorily. This means that
the tax burden is shouldered mostly by the middle and upper lower class through
direct taxation like value added taxes or VAT.
In the end, what is needed is not tax reform. What is needed first is a radical
anti-corruption campaign to stop the bleeding away of the financial lifeblood of
the government. Then and only then, with corruption under control, can there be
a meaningful discussion about tax reform. Absent this necessary pre-requisite,
tax reform will simple become another source of illegal money for corrupt
government officials, money obtained from the sweat and tears of honest Filipino
workers.
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