Higher budget deficit inevitable

I have been, as expected at this time of the year, in a foul mood. That’s because I had to pay the second installment of my income tax. Again, I feel sorry for myself because I know, there are many other citizens who earn multiples of what I make who should be paying more taxes but aren’t. That’s because the tax system is flawed. It merely collects from those who are easy to collect from like those with fixed income such as myself. The big fish? They are allowed to swim away.

In fact, most of the taxes I pay are withheld at source. The reason why I still have to pay more at tax time is because like many Filipinos today with kids in college, I work more than one job. When income from different jobs are added up, my bracket goes up, making the tax withheld inadequate. Also, some jobs like writing this column pay professional fees that withhold only 10 percent. That’s way below my tax bracket when income from all sources are put together.

I have been trying to convince myself not to feel so bad because I am helping President GMA reduce the budget deficit. I know her ability to make a real difference is severely limited by the resources she has at hand. However, I think of all the professionals and assorted rent-seekers from the elite who I know pay as little as possible (if anything at all) and I realize that the system is so unfair.

How to make the system more efficient and fair to guys like me is what government policy makers should think about. My suspicion is, if there is a way of instituting a tax system based on luxury assets held by people (from cars, condos, mansions and exclusive club memberships), maybe the elite will be given the patriotic opportunity to support the motherland that sustains them.

Another way of going about it is to tax the number of times people’s faces appear in the society columns doing the things rich people do. Call it the social aggravation tax, largely because this kind of behavior aggravates the social tension between the rich and the poor. A financial penalty is justified to compensate for the damage done to the social fabric.

Budget deficit

Indeed, it is time that government bureaucrats start being innovative in trying to bridge the budget deficit. I understand that the Department of Finance is considering the need to raise its budget deficit target this year to P180 billion, or 24 percent more than its P145-billion target. The higher deficit level is obviously needed because the economic recovery it was counting on to help reduce the budget gap is not going to happen this year.

In fact, government looked at a deficit target of between P170 billion and P225 billion. This was reduced to P145 billion because newly appointed Arroyo technocrats tried to look at a more optimistic scenario following EDSA 2. So they talked of promising prospects for a recovery that should boost collections of the bureaus of internal revenue and of customs and even allow the sale of state-owned assets. We now all know these are all not going to happen. Not this year, anyway!

As if things were not bad enough here, even in the US, upon which our economic health depends, the economy’s direction is neither here nor there with a downward bias. A good friend of mine from the UP days, Ray Altarejos just e-mailed me in reply to my query about the job market in the US these days. Now a New York-based entrepreneur for many years, Ray replied that the situation is getting really bad. A portion of his e-mail is interesting.

The job market in the US is getting bleak. The collapse of dot com and new telecom companies has now spilled over to venture capital and investment banking firms. It could get very nasty – very similar to the 1990/91 recessions. I hope not.

Last week, I attended the annual NYC venture capital conference – the venture capital pilgrimage in the East Coast. Attendance was down 50 percent. Moreover, a lot of the attendees were looking for jobs – former CEO’s, COO’s, CFO’s of dot coms and bankrupt start-ups.

They were not really conference participants. They were looking for jobs at the conference as noted in their trade show ID’s - Mr. Joe Smith - Former CFO – Wharton MBA.; But these jobless guys made the show interesting. They made public confessions of their mistakes and what they should have done. And, what is good in America is that being out of work is not a stigma...you’re just in between jobs. Somebody will ultimately hire you...hopefully.

It does seem things in the US will get worse before they get better. And that goes for us back here too. Our technocrats should consider worse case scenarios and make plans on how we will respond.

Our people must be told the real score so that expectations can be lowered. Citizens should also not make things more difficult than it already is. This shrill debate on the minimum wage and the strike threats can only make things worse. Or maybe, that’s the whole point of the protest organizers. Make things simmer into an explosive revolutionary situation.

So, what do we do now that we know a budget deficit is inevitable? Will we wait until we reach a point where we can no longer service our foreign debts, as is about to happen in Argentina?

Mercedes Benz

I received this e-mail from Gerardo L. Garcia, AVP-Marketing Services Universal Motors Corp. enlightening me on the correct company selling Mercedes Benz cars in this country. Goes to show I am getting terribly dated. Here is his e-mail.

We would just like to clarify one point in your write-up today about the President’s official Benz vehicle. Universal Motors Corp. (UMC) did start out as the Mercedes-Benz assembler/distributor in the Philippines when it was established in 1954. However, UMC has been assembling and distributing Nissan light commercial vehicles since 1971 when it signed a distributorship agreement with Nissan Motor Co., Ltd. of Japan. In fact, the backup Patrol Safari which the President boarded after her Benz got stuck (used by her security group) is one of the Nissan light commercial vehicles we carry. Other Nissan models we market are the Terrano, Urvan and Frontier pickups.

Commercial Motors Corp. took over the Benz distributorship and continues to handle the brand up to the present. Thank you for your kind attention.

I stand corrected.

Math problem

A businessman was confused about a bill he had received, so he asked his secretary for some mathematical help.

"If I were to give you $20,000, minus 14 percent, how much would you take off?" he asked her.

The secretary replied, "Everything but my earrings."

(Boo Chanco’s e-mail address is [email protected])