Power and compassion

I came across with a December 2008 issue of Psychological Science, a journal of the Association for Psychological Science, which revealed that “individuals with a higher sense of power experienced less compassion… compared to low-power individuals.”  Obviously, this is seen and is so obvious among politicians. Thus, I can’t help but agree with this study.

Such study was done almost a decade ago and has become so pronounced nowadays.  In fact, it is not just power that is so much displayed.  Today, it is power and hate.

While it is true that elections were done last year, animosities still linger on.  Coupled with the candidates’ ultra-engaging bunch of supporters, these animosities might be even headed to something unpalatable.

Indeed, after every election, we have become witnesses of how some leaders utterly display their power.  Truth to tell, despite all the wealth they had, they seemed face with the insurmountable problem of filling in their insatiable lust for it.  Setting aside bankable reasons, they tried to wield their influences to a wild extent just to let every Juan see that they were powers to reckon with.

To recall, two of the most visible characters in the then sad tale of Cebu politics were Mayor Tom and Governor Gwen. Then, in their usual bravado, they fondly labeled each other the “Prince of debt” and the “Queen of darkness”.  Battle-scarred politicians at that, they didn’t really mind.  They just shrug them off.

However, we may ask, what about if the powerful politician or local government executive is up against a non-politician?  Or, simply put, between the mayor (as the regulator) and the powerless businesses (as the regulated).  Will he still utterly use his power just to display his might and expect the powerless to just shrug them off?

To recall, Mayor Tom is up against a branch of a universal bank.  He filed a case and is adamantly intending to close the branch.  Due, allegedly, to the gross understatement of the bank’s branch's reported revenue.

Curiously, the understatement of the bank’s branch’s income is worth looking into.  For one, banks are regulated by the Bangko Sentral ng Pilipinas (BSP) and, thus, considered as one of the highly regulated industries in the country.  Furthermore, the bank is listed at the Philippine Stock Exchange (PSE).  Obviously, both institutions require the highest degree of transparency.  Therefore, in all likelihood, there is always that presumption of regularity.

Notably, I had the opportunity of working with one of the biggest auditing firms in the country.  I was exposed in the audit of banks (Rural, Thrift, Commercial and Universal Banks).  While most of those banks had several branches, others were just standing alone.  Though were experienced several years ago, I had noticed then that there were branches that were just good in deposit taking.  Other branches are just so good in lending operations.

Therefore, if one tries to figure it out, the branch that solely accepts deposits may never have any revenue or income at all.   On the other hand, the branch that is good in lending will have so much revenue.

Then as we try to understand local taxation, we may bump into the term “Gross Receipt” as the tax base.  So that, we should try to figure it out.  “Gross receipt” should mean the receipt of cash.  The next question is, what are these cash receipts all about?  Are these out of sales? If yes, then, logically, these are taxable because the taxpayer earned.  What about if the cash receipt is a loan?  Is this taxable? Of course, not.  Why?  Because this is not income.  In fact, this is a liability.  The taxpayer shall pay it in the future and shells out additional amount for the cost of borrowing.

Likewise, a bank is in the same situation.  When it lends, it receives cash payments from borrowers as return of what was lent plus interest.  The principal isn’t taxed because it was just a return of what was lent.  However, the interest income is taxable as it is revenue.

On the other hand, when a branch simply takes deposits, then its cash receipts will all be liabilities.  In fact, it is still to shell out certain amount for the depositors’ interest earnings. Therefore, if one should go through the definition of “Gross Receipt”, nothing is even taxable.

Hopefully, this is just a product of pure misunderstanding.  However, if indeed, the branch erred, then the appropriate penalties maybe slapped.  Closing it shall tantamount to death penalty, something most citizens abhor.   If the branch is right, then, wishfully, we can all compassionately accept it.

Indeed, this ongoing row presents several possibilities.  Consequentially though, there could only be one clear possibility, and, it could be worse.  We are sending wrong signal to prospective investors.