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Why make the poor pay for COVID-19 response?

By Sonny Africa

There’s more than enough money for all the COVID-19 response we need – the Duterte administration just has to take the side of the people and stop being so scared of the rich.

The Philippines is in the middle of its worst public health and economic crisis in decades, possibly even in its history. The social, economic and health measures needed to deal with this are undoubtedly expensive. But are they unaffordable?

Hangin

The government seems to think so. The president famously said that the government does not have enough money to respond – “hangin lang iyan,” he lamented.

The rest of the Inter-Agency Task Force for the Management of Emerging Infectious Diseases haven’t been as blunt but they’ve been acting that way. The social welfare department has, in effect, been rationing already stingy cash aid with unduly strict requirements. The health department isn’t testing, tracing, isolating and treating as much people as they should for want of resources.

The finance department is at the helm of the government’s economic team. It is voting with its feet – its Philippine Program for Recovery with Equity and Solidarity (PH-PROGRESO) and stimulus plans don’t give income support for tens of millions of cash-strapped families beyond the lockdown.

Unfortunately, strangely affirming the importance Karl Marx gives to the economic base of society, the economic managers are too decisive. The finance department is also in charge of revenue generation. If it says there isn’t any money, then the rest of government won’t have any money. Which explains where the president’s hangin comment came from.

But is there really no money to be had?

The plan

But before looking into that, a more basic question – how much does the government really need? Four months into the pandemic, it’s still not actually very clear. PH-PROGRESO is presumably the national government’s plan but this doesn’t include what must also be considerable efforts at the local government level.

The four-pillar PH-PROGRESO also has to be interpreted carefully because the finance department adds up actual spending, loans and guarantees, foregone revenue, financing, and additional liquidity to come up with an impressive looking grand total of Php1.74 trillion.

As it is, it looks like there’s only Php506 billion in actual spending. This includes Php321.6 billion in emergency support, Php133.7 billion in loan and credit guarantees, and Php50.7 billion for health measures.

The balance of Php1.24 trillion is actually composed of tax cuts and other foregone revenues (Php142.8 billion), liquidity released into the system by central bank measures (Php233 billion), and financing mostly from new debt (Php861.8 billion). Put another way, the government doesn’t actually need to raise funds for all these items accounting for 71% of the ‘grand’ total.

So where to get that Php506 billion that will actually be spent?

The Php861.8 billion in new financing of PH-PROGRESO – Php436.9 billion from official development assistance (ODA) and Php419.4 billion from government bonds – is presumably a source.

But the program also mentions up to Php673 billion freed up from existing budget items and so not really needing new financing or revenue sources. This is from the 2019 and 2020 national budgets, off-budget items from government-owned and controlled corporations and government financial institutions, and private sector contributions as well as from “financial sector, monetary policy, regulatory relief”. In his last weekly report to Congress, the president cited raising Php257 billion already from discontinued, abandoned, reprogrammed, reallocated and realigned items in the 2019 and 2020 budgets.

Looked at in this way, it appears that the government has come up with a reasonably prudent plan.

Poor pay for meager response

But appearances can be deceiving. There are two problems here.

The first is that the planned Php506 billion in actual spending falls far short of being a sufficient response. The COVID-19 response needs to be much more comprehensive and ambitious. The combined cost of the range of health measures, emergency relief, income support, and enterprise support needed is likely more in the order of Php1.5-2 trillion.

Clearly, the perceived lack of funds is a major binding constraint to the broader response that is really needed and, indeed, even just a larger COVID-19 response than at present. This self-imposed limitation gravely undermines the public health response, risks undue infections and deaths, and will mean socioeconomic difficulties on a massive scale.

Which leads to the second problem. Meager as the response is, the poor are paying for it more than they should – through debt and higher taxes – while the rich are paying much less than they can.

Most of the Php861.8 billion in financing of PH-PROGRESO is actually new and additional debt that will be paid for from taxes. Only a tiny Php404 million of this financing are grants and the rest are ODA loans and government bonds. The government has already been reported as seeking US$5.7 billion in foreign loans for its COVID-19 response. To date, the finance department reports US$4.9 billion in COVID-related foreign debt.

The taxes to pay for this debt are disproportionately borne by the poor with their low incomes. Especially after the Tax Reform for Acceleration and Inclusion (TRAIN) Package 1 of 2017, the country’s tax system is more regressive and consumption tax-oriented than it has ever been.

The self-imposed debt trap even to so-called development agencies and friendly governments is glaring. The Duterte administration is programmed to pay US$1.7 billion in debt service to multilateral and bilateral agencies – especially the World Bank and Asian Development Bank – this year. These are also the very agencies it has borrowed an additional US$2.5 billion from to respond to COVID-19.

Taxing consumption

The government is also quick to tax consumption including of the poor. Consumption taxes are inherently regressive in being paid the same by everyone regardless of how poor or rich they are – as opposed to direct taxation of income and wealth which is more progressive.

The administration has already hiked tariffs on imported oil products by 10% to raise funds for dealing with the pandemic. The planning agency, headed by a former finance department official, is already proposing higher consumption taxes that will add to the burden of poor and middle class families.

This includes a digital economy value-added tax proposal which adds a Php50 billion tax burden on online consumers over 2021-2023, higher taxes on sweetened drinks and junk food adding a Php22.7 billion burden, and a higher Motor Vehicle Road Users’ Tax adding a Php40 billion burden.

Increasing taxes on low-income families amid a recession would be perplexing if the insensitivity of the Duterte administration and its economic managers when it comes to taxes were not already well-established. They are only being hugely opportunistic in exploiting the COVID-19 crisis to push their long-standing TRAIN agenda of raising consumption taxes on poor and low-income groups while reducing taxes on the rich.

It’s all a bizarre repeat of TRAIN where the poor are made to pay more so the rich can pay less. This time around, amid the COVID-19 crisis, the rich will benefit from the biggest corporate tax break in Philippine history.

TRAIN Package 2, comically renamed Tax Reform for Attracting Better and High-Quality Opportunities (TRABAHO) bill, soberly renamed the Corporate Income Tax and Incentives Reform Act (CITIRA), and now opportunistically renamed the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE), is being primed for rapid legislative passage. The Duterte administration is giving up Php667 billion in potential COVID-19 response funds to boost corporate profits.

Tax the rich

So where can funds for the comprehensive COVID-19 response needed come from? From the very same sources that funding for national development should come from – the accumulated wealth and income of the rich.

The pandemic has seen the ideas of solidarity, unity and compassion raised repeatedly. Beyond spontaneous acts of charity, paying higher taxes is putting money where your mouth is.

In our population of 108 million, an estimated 596 Filipinos each have wealth of some Php2.5 billion pesos or more. This includes the 50 richest Filipinos whose combined wealth of around Php4.1 trillion is, by IBON’s estimates, more than what the poorest 71 million Filipinos own combined.

There’s no reasonable argument that taxing their wealth above Php1 billion will adversely affect their well-being and welfare. A wealth tax of 1% on wealth above Php1 billion, another 2% above Php2 billion, and another 3% above Php3 billion will raise Php236.7 billion annually from these 50 richest alone. They are not going to be spending this anyway versus the huge social, economic and health returns from using this for COVID-19 response.

Other tax measures can also be considered. A two-tiered corporate income tax scheme with higher taxes on large firms and lower taxes on micro, small and medium enterprises can be designed to generate about Php70 billion annually. Similarly, a personal income tax scheme with higher taxes on just the richest 2.5% of Filipino families can raise about Php127 billion annually.

These are illustrative figures for now but the Duterte administration can come up with more precise figures if it was so inclined. There are technical challenges but these are not insurmountable and no reason not to try.

A wealth tax, higher taxes on large corporations, and higher taxes on the richest Filipinos are the most rational sources of revenues for COVID-19 response and development.

Does Congress have the political will for these? Sadly, our senators and representatives, looking to the 2022 elections already, are the biggest political won’t. #

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Kodao publishes IBON articles as part of a content-sharing agreement.

Joma asks Isko: ‘What are your plans for the poor vendors?’

Communist Party of the Philippines (CPP) founding chairperson Jose Maria Sison asked Manila Mayor Isko Moreno his plans for the poor vendors of Manila who many fears are being swept aside in the ongoing campaign to clear the capital city’s streets of obstruction.

In a video message shown at the end of Moreno’s speech before the Rotary Club of Manila at the New World Hotel in Makati City last Wednesday, Sison asked if Moreno is looking after the poor vendors.

“I have only a simple concrete question: No doubt that it is highly commendable that you have cleared the major streets of Manila of the graft-laden anarchy of vendors. But are there provisions for the poor vendors to peddle their goods in some permissible areas or to have alternative means of livelihood?” Sison asked.

Moreno gamely replied to the question, addressing Sison as “Manong Jo,” an honorific used by both government and National Democratic Front of the Philippines (NDFP) peace negotiators.

“What we did was to clear the backbone of the city. Then ang tinatanong po ni Manong Jo, saan natin inilagay ang mga naapektuhan ng pag-aayos? Sila yung inilagay natin sa mga…side street,” Moreno said.

“That is why, when you go to Quiapo, when you pass by Carriedo, open ang Plaza Miranda. You can see Hidalgo and Villalobos, naroroon ang mga mahihirap natin na nagtitinda,” the mayor said.

“So sa inyo ang Carriedo, ang Plaza, sa gilid naman ang mga vendor,” he added.

Before winning in last May’s election, Moreno served as an NDFP peace consultant for the urban poor in its peace negotiations with the Duterte government in 2016 and 2017.

In 2018, Moreno was appointed by President Duterte as Department of Social Welfare and Development assistant secretary.

Screen-grabbed from Isko Moreno’s FB page.

In his video message, Sison recalled it was him who introduced Moreno and Rotary Club of Manila president Jackie Rodriguez in The Netherlands at the time of the fourth round of the Government of the Republic of the Philippines-NDFP peace negotiations in 2017.

Rodriguez is a prominent businessperson from Davao City.

“I wish that they would help each other to bring changes for the benefit of the people of Manila,” Sison said. Sison also recalled another connection between himself, Moreno and Rodriguez in the late showbusiness icon German Moreno who groomed the young actor into stardom early in his acting career.

“I wish to share with ‘Ka Isko’ the fact that German Moreno, or Kuya Germs, his adopted father, was a classmate of Jackie and myself in Letran,” Sison said.

Sison also congratulated Moreno in his “resounding success” in becoming Manila mayor.

“In so short a time, he has done so much to impress the people of Manila and the entire Philippines with his determination and effectiveness in serving the people,” Sison said. # (Raymund B. Villanueva)

Slow TRAIN cash transfers highlight govt’s insensitivity–IBON

“The poor will get relief about three months into suffering TRAIN-induced price increases with millions of others only getting it much later.”

 Research group IBON said that the slow implementation of the Duterte administration’s social mitigation measures including its cash subsidies highlights how these are just an afterthought to cover up how the Tax Reform for Acceleration and Inclusion’s (TRAIN) program is anti-poor and pro-rich. TRAIN was railroaded last year to already be able to raise revenues starting January 2018 even if the supposed mitigation measures were not yet clear.

This is in reaction to the Department of Finance (DOF) announcement about the looming implementation of the government’s unconditional cash transfer (UCT) to supposedly help the 10 million poorest Filipino families cope with the impact of TRAIN. The DOF said that the 4.4 million existing Pantawid Pamilyang Pilipino Program (4Ps) beneficiaries and three (3) million indigent senior citizens will start receiving the Php200 per month cash subsidy in March. The balance of 2.6 million households are supposed to start receiving theirs in August.

IBON executive director Sonny Africa noted that the DOF was last year quick to undertake the staff work for raising taxes on the poor and giving income tax relief to the rich. Yet, in contrast, it was grossly unprepared to implement any of the supposed social mitigation measures even nearly two months into the law’s effectivity. As it is, the poor will get relief about three months into suffering TRAIN-induced price increases with millions of others only getting it much later in August or after eight months.

Africa also said that the DOF was merely scrambling to report 10 million helped “no matter how sloppy the figures.” “The numbers don’t even add up,” he said, “because many of the 3.3 million poor elderly will likely already be among the 4.4 million CCT beneficiary households so double-counting is already happening, more so two or more elderly are in these poor households.”

Meanwhile, TRAIN’s promised fuel subsidies for public utility vehicles (PUVs), fare discounts for the poor and other social mitigation measures still remain unrealized, said Africa.

Lastly, Africa said, it is worth repeating that the cash subsidies are temporary and only from 2018 to 2020. “These are also the three years when oil taxes keep rising and prices keep getting pushed up higher and higher,” Africa noted. “The real TRAIN shock happens in 2021 when the UCT gimmick is gone but the prices that the poor pay for their basic goods and services will be immensely higher,” he said. (IBON News / February 27, 2018)

CA postpones Taguiwalo’s confirmation hearing anew

Department of Social Work and Development (DSWD) secretary Judy Taguiwalo’s confirmation hearing with the Commission on Appointments (CA) at the Senate this afternoon has been postponed according to her Facebook social media account.

Speaking to dozens of disappointed supporters who trooped to Pasay City, Taguiwalo said she was informed by the CA that the hearing is postponed because Health secretary Paulyn Ubials hearing is not yet finished.

“This is the third time we came here. The first time was postponed. Then we finally had a hearing last week. Today should have been our third. But as of 12 noon, we were informed of the cancellation,” Taguiwalo explained.

Taguiwalo told her supporters that while she would continue to render service even as a private citizen, she said her confirmation is important as the DSWD has resources meant for the poor.

“We really want the government’s resources to go to those who need them most,” she said.

She admitted that her CA confirmation is an uphill battle but she perseveres because of the widespread support she is getting from various marginalized sectors.

Taguiwalo’s 10 months in office have been marked with positive feedbacks on DSWD’s prompt response to calamities such as strong typhoons and earthquakes that hit various parts of the country.

She also received public support for the reforms she instituted at the DSWD such as Memorandum Order 9 that reminded DSWD employees that so-called guarantee letters from congressmen is not a requisite in the identification of beneficiaries.

MC9 also ordered the entire agency to act on requests from intended beneficiaries even without a letter from lawmakers.

Taguiwalo said the long wait she is being made to suffer is a form of torture.

“Pass or fail, I can deal with that.  But I don’t think it is acceptable that the hearings keep getting postponed,” she said.

She nonetheless assured her supporters she will continue doing her work.

Meanwhile, Taguiwalo’s former colleagues at the University of the Philippines again urged the CA to immediately confirm Taguiwalo, saying she embodies the change President Rodrigo Duterte promised the people.

“If there is a government agency that shows genuine change from the corrupt governments of the past, it is the DSWD with Judy Taguiwalo as secretary,” Congress of Teachers and Educations for Nationalism and Democracy’s Sarah Raymund said.

Taguiwalo said she will wait for notification for the date of her next confirmation hearing. # (Report and photo by Raymund B. Villanueva)

Taguiwalo admits ‘tolerating’ Kadamay members, poor citizens

FOLLOWING accusations the Department of Social Welfare and Development is “tolerating” Kadamay members who occupied vacant housing units in Bulacan province by giving them assistance, Secretary Judy Taguiwalo called a press conference last Friday.

Taguiwalo tried presenting and discussing other DSWD programs but majority of journalists present were focused on the agency’s distribution of food packs in Pandi, Bulacan last week and on accusations the agency is giving special treatment to the “occupiers.”

Taguiwalo said all of DSWD’s programs are for the poor.  She said the agency is always ready to give help to those who ask, especially the poor.
Read more

IBON SURVEY: MORE FILIPINOS UNSATISFIED WITH PRES. AQUINO’S PERFORMANCE

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The latest survey of IBON shows that more Filipinos are not satisfied with Pres. Aquino’s performance of his duties as chief executive.

The share of respondents who said they did not find the President’s performance satisfactory rose from 43.7% in January to 48.9% in May.

Asked what they can say about Pres. Aquino’s performance, 30.9% of 1,496 respondents answered ‘satisfactory’, a decrease from 37.3% in January. Meanwhile, 20.1% answered ‘don’t know’.

The latest survey round was conducted from May 13 to 23 across various sectors nationwide and has a margin of error of plus or minus three percent. The latest survey was a non-commissioned survey that used multi-stage probability sampling.

Below is the tabulation of Filipino’s perception of Pres. Aquino’s performance.

What can you say about Pres. Benigno Aquino III’s performance these past three (3) months?

January 2015 May 2015
Satisfactory 37.3 30.9
Unsatisfactory 43.7 48.9
Don’t know 18.4 20.1
No answer 0.6 0.1
Total 100.0 100.0

(For more IBON Survey please visit www.ibon.org)

IBON Foundation, Inc. is an independent development institution established in 1978 that provides research, education, publications, information work and advocacy support on socioeconomic issues.