What would President Marcos do?

Everyone’s waiting with bated breath, as if waiting for the next episode of an edge-of-your-seat Netflix drama – how would President Marcos handle the ghost employee scandal that has rocked the Bangko Sentral ng Pilipinas?

A source close to the halls of power said Marcos will come up with a decision in the next ten days. Anything can happen but clearly, the fate of the two Monetary Board members (MBM) at the center of the jaw-dropping ghost employee issue is in the hands of Marcos because MBMs are presidential appointees.

BSP Governor Eli Remolona Jr. has already submitted to Malacañang the results of the central bank’s internal investigation.

The BSP charter is clear and all the president needs to do is to look at it.

According to Republic Act 7653, otherwise known as The New Central Bank Act, Section 10 of Article II states that the President may remove any member of the Monetary Board for several reasons, one of which is:

“If the member is guilty of acts or operations which are of fraudulent or illegal character or which are manifestly opposed to the aims and interest of the Bangko Sentral.”

There’s the rub, though. Some sources speculate that Marcos, the Mr. Nice Guy that he is, does not want to widen or worsen the rift between his family and the Dutertes. The two MBMs involved in the issue are Duterte appointees.

BSP insiders and former MBMs, however, said that in this case, Marcos may not have a choice given that the law is clear when it comes to dealing with members who are guilty of illegal actions, unless of course the concerned MBMs are able to explain that hiring ghost employees was not illegal or that they weren’t ghost employees to begin with.

In a statement, the BSP already called such acts as irregular.

“The irregularities appear unprecedented in an organization that upholds integrity and professionalism at all levels.”

The BSP also said that in January, an investigating team of the BSP’s Office of the General Counsel submitted its final investigation report. “The Office of the General Counsel signed it.”

From late February to early March, four of the employees and one direct supervisor implicated in the report tendered their resignation. Administrative disciplinary cases were filed in March.

Indeed, the BSP has acknowledged the irregularities following its internal investigation. It is now up to President Marcos to act on the matter.

Former BSP executives and ex-MBMs I’ve talked to believe that the law must prevail. They said that it took decades to rebuild and protect the integrity of the country’s monetary institution after its past life, the old central bank, was mired in its own controversies.

They lament that the scandal has tainted the BSP’s integrity and must therefore be rectified.

As for me, I’m also curious how it happened. What could be the justification? Could it be possible that the MBMs involved did not know that there were ghost employees in their offices?

No, this is not possible, former and current MBMs told me. They said the MBM approves every employee in his or her payroll and likewise signs every staff member’s vacation leave and sick leaves.

This issue, according to BSP insiders and ex BSP executives, is now being closely watched by the international community including central bank organizations in Southeast Asia and beyond, as well as international credit ratings agencies.

What happens next is anybody’s guess but for sure, everyone’s waiting.

I hope that Marcos, who has been busy trying to court international investors to do business in the country, knows the urgency of addressing the issue properly.

Taxing mega corporations

I recently had a chat with former BIR Commissioner Kim Henares who was in Brazil last month as a speaker at the G20 International Tax Symposium.

Comm. Kim discussed the problem of base erosion and profit shifting (BEPS), taking off from the OECD’s move to form the Global Forum For Taxation on addressing BEPS. This tax base erosion and profit shifting happens because multinational enterprises exploit gaps between different countries’ tax systems.

The OECD, she said, has estimated that between four percent to 10 percent of global corporate income tax revenues, or around $100 to $240 billion, were lost as of 2013, because of BEPS.

“It’s a scandalous situation where large companies like Apple, Starbucks and Amazon, though reporting large revenues, are paying little or no corporate taxes,” Comm. Kim said in her presentation.

Against this backdrop, she said it’s good that the OECD recognized the problems of base erosion and profit shifting. However, she also said the OECD missed specific problems affecting developing countries like the Philippines due to a lack of consultation.

For example, she said that OECD attempts a reallocation of residual profits of mega-corporations but applies this to only a few firms and allocates only a small portion of profits.

She said the OECD must consider revisiting and potentially overhauling double taxation treaties to better fit developing countries like the Philippines as well as the global and digital world.

Moving forward, Comm. Kim said that countries like the Philippines must also support the UN Framework Convention on International Tax Cooperation so that their difficulties in taxing cross border transactions can be heard and they can come up with a solution that will fit their economies.

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