Rifts

In the aftermath of a messy impeachment episode, the first task of Renato Corona’s successor is to rebuild a demoralized judiciary. If we journey towards the accomplishment of that task, the first steps inspire little confidence.

It was not a good sign that when Chief Justice Ma. Lourdes Sereno took her oath at the Palace, the most senior associate justices were absent from the ceremony. That was, according to lawyers who should have institutional memory, unprecedented.

The oath-taking of the first female Chief Justice, coming after an unprecedented impeachment episode that put the independence of the Supreme Court in question, should have been a historic moment. That poorly-attended ceremony seems to have been undertaken in haste and surely did not convey a sense of great moment. The President did not deliver a stirring speech indicating that moment as momentous.

The media dutifully reported the ceremony, but did not give much attention to the poor attendance. That seemed the correct thing to do. This was not the occasion to pass intrigue or entertain unfounded speculation. Our judicial branch is gravely wounded; this was a time for reconstructing institutions.

The choice of Corona’s successor discomfited some. Sereno was the youngest aspirant to the highest judicial post. Because of that, she will be entitled to sit for 18 years. That seemed like a major gamble to take with an unknown entity. It definitely broke a well-regarded precedent where the Chief Justice was chosen from among the most senior associate justices.

Last Monday, Chief Justice Sereno led the flag-raising ceremony on the premises of the High Court. That was her first appearance as leader of the judicial branch. Again, the most senior associate justices were absent.

This time, even the most compliant media outlets could not continue playing down the evident snub. The absence of the senior justices from an event that might have served as a photo-op for judicial solidarity was glaring — especially as the new Chief Justice claimed, in her brief remarks, some sort of divine mandate.

That claim is more than just startling. A divine mandate puts the new Chief Justice above the law. This is a pretty disturbing thought.

There is something seriously amiss here. One senior associate justice called for the release of psychological tests taken by all aspirants for the highest judicial post. Unless those tests are released, all sorts of speculation about them will proliferate.

There is something seriously amiss here. Palace spokespersons have stepped up to the new Chief Justice’s defense, pleading she be given the time to prove her worth. Ricky Carandang’s propaganda apparatus moved to high gear, defending the President’s choice. This includes pulling in the usual Akbayan talking heads and the half-witted trolls to Sereno’s defense. The propaganda effort attempts to caricature the concerns of the senior associate justices as mere griping.

While the rift within the Supreme Court gets more curious by the day, another factional flashpoint appears at the DILG over the case of Undersecretary Rico Puno.

Deadweight loss

There is such a thing as “optimal taxation.” It is not too hard to understand and involves some pretty uncomplicated economics.

For instance, if taxes on a product are raised too high, resulting in prices consumers cannot afford, consumption simply falls. No taxes are collected if consumers shy away from a product. Instead of realizing revenues, government stands to lose them.

Ben Diokno, UP economics professor and former budget secretary, criticizes the Department of Finance for being removed from reality and failing to do a proper market analysis in proposing steep increases in excise taxes on so-called “sin products.” Specifically, our finance authorities could give no indication they studied what is technically called “deadweight loss” to back up their proposed steep excise tax increase.

“Deadweight loss” is the sum of loss of consumer capacity, tax avoidance or evasion and increase in smuggling that happen when new tax schedules are not optimal. Instead of improving government revenues, the “deadweight loss” arising from an unwise tax measure could in fact result in reduced revenues.

Diokno served as Budget Secretary during the Estrada administration and Budget Undersecretary during the Cory administration. To demonstrate his point, he cites the decision of the Cory administration to lower tariff rates. The measure discouraged smuggling and actually improved revenues for government because they were more optimal.

The proposed 700% hike in excise taxes on “sin” products could have the reverse effect. It could encourage tax avoidance, lower consumer demand and rampant smuggling that government ends up with less revenues instead of more.

Under questioning from senators during hearings on the proposed hike in excise taxes on “sin” products, our finance authorities could not produce evidence that they have done enough due diligence on the economic repercussions of the measure. Both Sen. Ralph Recto (an economist) and Senate President Juan Ponce Enrile (a former finance executive) consider the proposed excise schedule as based largely on fantasy.

It appears from the testimonies given that our finance authorities studied options that would raise revenues from between P31.2 billion to P60 billion. Rather arbitrarily, Finance Secretary Cesar Purisima insisted on a tax hike that will theoretically raise revenues by P60 billion.

It was an option taken without doing the economic studies on optimal taxation rates. Without such studies, there is really no basis for saying the excise tax hike will improve public revenues.

No one really objects to increasing excise tax rates to improve revenues. The real debate is whether the optimality of the proposed taxes was studied enough to assure that revenues will indeed improve and the market conserved.