The greatest good

At 75 years old, Department of Finance (DOF) Secretary Benjamin Diokno wishes to see the poverty incidence in our country reduced during his lifetime. At the very least, Diokno is determined to achieve the goal of a single digit poverty incidence by 2028. Or this is towards the end of the six-year Medium Term Development Plan (MTDP) of President Ferdinand “Bongbong” Marcos Jr. (PBBM). As the head of the Cabinet economic team of PBBM, Diokno disclosed the 2023-2028 MTDP targets to bring down the poverty level to as low as nine percent.

As a former member of the Cabinet economic team during the term of former President Rodrigo Duterte, Diokno recalled the original target of poverty reduction was set at 14.5 percent. Diokno previously headed the Department of Budget and Management (DBM) and stayed on as member of the Duterte Cabinet economic team even after he was subsequently appointed as the Governor of the Bangko Sentral ng Pilipinas (BSP).

“We did not sit idly during the pandemic. We put in a number of reforms needed,” he stressed. He cited as examples the Tax Reform for Acceleration and Inclusion (TRAIN) Law; the amendments of the Public Service Act; the new Foreign Investments Act, among other landmark measures that got enacted even while the pandemic impact derailed economic projections.

“All of these made the Philippine economy stand resilient,” Diokno enthused.

“I’ve been in the government for more than three decades already. I have seen the ups and downs of the Philippine economy,” Diokno waxed sentimental at the Kapihan sa Manila Bay news forum last Wednesday.

Diokno though won’t be drawn into commenting on the specific role of disbarred lawyer and losing senatorial bet in last year’s election Lorenzo “Larry” Gadon as Presidential Adviser on Poverty Alleviation. Purportedly, it is a Cabinet-ranked position, it is not clear yet if Gadon has a one-peso appointment, or pro bono. Gadon is supposed to advise the Chief Executive on the various anti-poverty programs of the government. Incidentally, Lope Santos III also holds Cabinet-ranked post as chairman of the National Anti-Poverty Commission of PBBM.

It is, however, the Department of Social Welfare and Development (DSWD) that has the largest fund allocations of as much as P100 billion in the yearly budget for the so-called “ayuda” for the poor. Foremost of which is the conditional cash transfer, more popularly called as the 4P’s geared to ease the lives of the impoverished Filipino families. Diokno though noted with deep concern the “leakage” in the 4P’s cash card program due to large amounts of “unclaimed” funds lying idle in the Land Bank.

Pursuing this desired goal to reduce poverty, Diokno echoed the commitment of the DOF to improve the government fiscal position and plug the “leakages” in the State coffers to better finance these anti-poverty programs.

“We are planning to revise our revenue collection targets further upward to take into consideration the implementation of tax measures that we are prioritizing in the medium term,” Diokno announced. Among these measures are the two remaining fiscal reform measures under the Comprehensive Tax Reforms Program (CTRP) but never got through the previous Congress.

The first is the Reform Package 3, or the Real Property Valuation and Assessment. As of last check by the DOF, the draft committee report is pending with the Senate ways and means committee. The counterpart version has already been approved on third reading at the House of Representatives in December last year.

And the Package 4 of the CTRP on Passive Income and Financial Intermediaries Taxation Act which Diokno cited aims “to simplify the complicated tax structure of financial transactions and deepen the capital markets” of the Philippines. It was passed by the Lower Chamber in November last year and has been pending at the Senate since August, 2022.

Also pending approval by the Senate, Diokno added, is the proposed value added tax (VAT) on digital services. This tax bill “seeks to level the playing field between and among traditional and digital enterprises,” he pointed out. The bill was approved by the Lower House in November last year.

Diokno confirmed the DOF is revisiting the implementation of the VAT system in the country. He admitted the government will not accept new or additional VAT exemptions and might even push for repeal of some exemptions if needed to maximize potential revenues.

As he has previously announced, the DOF will propose higher tax rate adjustments and new taxes to raise additional sources of revenues. These include the now controversial “sweet” tax and tax on “salty” or junk food products. The tax on “sweetened” products like beverages will seek the adjustment from the present 6 percent to uniform rate of 12 percent.

“These corrective tax measures aim to achieve the twin goals of curbing excessive consumption of unhealthy foods such as chips and sugary drinks while increasing fiscal resources for public programs,” he stressed. For obvious reasons, instant noodle products are not included in this proposed “salty” tax because these are mainstay items in the food packs given out as relief goods to calamity victims and low-income families.

Diokno credited the previous administration for nearly achieving the poverty reduction target at the end of the Duterte’s own MTDP from 2016 to 2022. Unfortunately, Diokno rued, the economic impact of the C0VID-19 pandemic in 2020 until last year had reversed the downtrend of poverty incidence that went up again to 21 percent at the end of the Duterte Presidency.

Diokno described the Marcos administration’s anti-poverty program is both “focusing on the poor” and has “trickle down” effect. He cited a World Bank (WB) study that identified 500 “poorest of the poor” municipalities in the Philippines have no access to clean potable water and high malnutrition rate.

Amid the severe criticisms on pushing such tax measures, Diokno comforts himself hewing close to English philosopher Jeremy Bentham’s “the greatest good for the greatest number” principle.