On government 8-point agenda: less loans, no wealth tax  

Projecting an air of confidence and optimism, the new administration’s economic team has announced an 8-point socioeconomic agenda for the next six years to carry out the development targets set by Ferdinand Marcos Jr. in his first State of the Nation Address.

In the near term, the plan seeks to address the problems of high/rising prices and the negative economic impacts of the COVID-19 pandemic. Job creation and sustaining growth from 6.5 percent to 8 percent are the medium-term goals.

To raise revenues to finance the plan, the economic team has vowed to maintain two stances: lessen borrowing (foreign and domestic) and focus on better tax administration rather than impose additional taxes.

Explicitly, economic team head Finance Secretary Benjamin Diokno rejects the proposals, separately put forward by a senator and by the IBON Foundation, to impose a wealth tax (based on a percentage of the total assets of each of the country’s billionaires). This is the same stance as that held by his predecessor, Carlos Dominguez III.

“We do not have to borrow as much as we did during the [pandemic] crisis years,” Diokno argued. Borrowings by the Duterte administration had bloated the national government debt to nearly P13 trillion, trimmed to P12.5 trillion as of the end of May. The debt level was more than 60 percent of the country’s gross domestic product or GDP. (Below 60 percent is the international benchmark for a safe debt-to-GDP ratio, which involves the country’s capacity to repay its borrowings.)

On taxation, Diokno pointed out: “What we inherited from the Duterte administration is a much better tax system. They did a lot of reforms so that itself will give us additional revenues, plus we have additional measures.”

On Thursday, Diokno gave his “marching orders” to the Bureau of Internal Revenue and the Bureau of Customs to fast-track their respective modernization programs “to increase our tax effort.”

“The government expects to collect more revenues on the back of a faster and more broad-based economic growth. Thus, efficient and effective tax administration will be critical in funding our socioeconomic priorities,” he said.

The 8-point agenda consists of the following:

• Ensure food security, reduce transport and logistics costs, as well as energy cost to families to protect their purchasing power and mitigate “socioeconomic scarring;”

• Address health by ramping up vaccination and uptake of boosters, strengthen social protection (ayuda?) and address the learning losses of students through the safe reopening of classes and improving the curriculum – all aimed at reducing the population’s vulnerability and mitigate COVID-19 pandemic scarring;

• Enhance bureaucratic efficiency and sound fiscal/financial management, and ensure a resilient and innovative financial sector to ensure sound economic fundamentals;

• Creation of more jobs by promoting trade and investments, improving infrastructure via the continued implementation of Build Build Build projects and by achieving energy security;

• Create quality jobs by increasing employability of prospective workers, encouraging research and development and innovation and enhancing the digital economy;

• Create “green jobs” by pursuing a green (land-based) and blue (sea-based) economy and establishing livable and sustainable communities; and

• Ensure a level playing field by strengthening market competition and reducing barriers to entry and limits to entrepreneurship.

These interventions (referring to the eight points), Diokno stressed optimistically, “will allow us to reduce the poverty incidence to nine percent by 2028 and elevate the country to upper middle-income status.”

But the goal of the country reaching upper middle-income status could be attained by 2024, asserted an even more upbeat Socioeconomic Planning Secretary Arsenio Balisacan. When that happens, he envisioned that the country could have more resources to fund public services and social protection.

Upper middle-income status means a per capita income of Filipinos at $4,046. (According to the World Bank, the Philippines’ per capita income in 2021 was $3,548.80.)

As regards the proposals for a wealth tax, one observation came from reelected Sen. Sherwin Gatchalian, reappointed chair of the chamber’s committee on ways and means. The idea came to him, he explained, upon finding out that Filipinos on the annual Forbes list of billionaires are not on the list of the country’s top taxpayers – which didn’t seem right.

“We should really fix the [tax] system so that the rich… would pay more taxes,” he said. The senator has yet to provide details of what he plans to do.

The think tank Ibon Foundation has already put forward a specific proposal: Impose a 1 percent “superrich” tax on wealth above P1 billion, 2 percent for wealth above P2 billion and 3 percent for wealth above P3 billion.

The Ibon suggestion, made during the Duterte administration in light of the pandemic, was picked up by the Makabayan bloc in the House of Representatives; they turned it into a proposed legislation, House Bill No. 10253. However, the bill remained unacted upon because then finance secretary Dominguez vigorously opposed it, claiming it would “drive capital out of the Philippines.”

Recently, another newspaper editorial pointed out the absence of such a proposal from the President’s list of priority measures in his first SONA, even as it would undoubtedly generate additional, substantial revenues for his administration’s ambitious agenda.

The lack of mention of the wealth tax in Marcos Jr.’s speech means that his administration “is making poor and middle-class Filipinos pay for debt that they didn’t even benefit from,” the editorial quoted Ibon Foundation executive director Sonny Africa as saying.

By Ibon’s estimate, the 2,919 Filipino billionaires are worth a combined P8.1 trillion, equivalent to 16 percent of the country’s wealth. “The proposed ‘tiny’ wealth tax,” the think tank said, “will contribute almost P470 billion a year to government coffers, minimizing the need to impose new or bigger taxes on the already overburdened poor and middle classes.”

As of 2020, Ibon Foundation estimated that the richest Filipinos own more wealth than the poorest 71 million Filipinos combined. At the very least, social justice calls for such wealth to be appropriately taxed.

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