The Long View
Sobriety versus Wowowee
By Manuel L. Quezon III
Philippine Daily Inquirer
First Posted 23:05:00 02/14/2010
THE two leading candidates, Aquino and Villar, have taken turns facing the Makati Business Club to put forward their views concerning business and the economy. Their views present an interesting study in contrasts.
Both seem to agree that, as Aquino put it, the country’s tax-to-GDP ratio must be raised to at least 15 percent, close to the 1998 levels of 17 percent, from the current 13.4 percent level, if a significant dent in cutting the budget deficit is to be made. Back in mid-January, Villar, speaking at the Romulo Foundation forum, referred to similar figures and said, “We lost about 3 to 4 percent; that represents about P250 to P280 billion [in lost taxes].”
At the time, Villar also said the answer was to focus on corruption and implement more efficient collection. He also proposed better use of the pork barrel, and what he called strategic borrowing to bring about economic stability (“I really feel we have to borrow for our Department of Health obligation of the state,” he said in the forum).
But that was then and this is now. On Jan. 21 Aquino spoke before the MBC, followed by Villar on Feb. 11. Where both seemed to have similar messages in mid-January, by early February Villar had more starkly differentiated his approach from that of his main opponent.
While both agree that the next president will inherit a substantial, even crippling, deficit from the present dispensation, Aquino pegged it at “P272.5 billion, or 4.1 percent of GDP” as of November last year; Villar, on the other hand estimated that the “deficit this year is projected to balloon to over P300 billion or about 3.5 percent of GDP.” So Aquino for one pegs the deficit higher than Villar percentage-wise.
Yet Aquino pledged: “We will refrain from imposing new taxes or increasing tax rates,” while Villar cautioned that “I cannot promise no new taxes; It would be irresponsible of me to limit my options knowing the magnitude of the problem.” Instead, he said he would push to raise revenues and spend wisely, but “as we have seen, raising revenues is not a simple matter.”
In the first place, Villar pointed out, the country already has one of the highest tax rates in the region. Let me venture that in the second place, Villar knows he’s saddled with legislation that has helped reduce revenue collections to provide perks for specific industries. For example, back in July 2009, Villar had taken pride in being one of the principal co-authors of RA 9640 which lowered amusement taxes from 30 percent to 10 percent of admission fee gross receipts: he said it would provide a boost to the film industry.
So Villar set out to dampen expectations and, along the way, differentiate himself from his main rival by contrasting the can-do optimism of his nemesis with a heavy dose of his own, pragmatic, reality: “there is no country in the world that has been able to eliminate [graft and corruption] completely,” he told the MBC, although “I will make clear that there will be zero tolerance of graft and corruption,” and, furthermore, “I will work hard to reduce it significantly.”
The former was a meaningless platitude while the latter immediately served to dampen any expectations he might’ve raised.
In contrast, Aquino’s earlier pronouncements were more sober: “In addressing the looming fiscal crisis, good governance and the drive against corruption are critical components in our strategy,” and, “I strongly believe that we can collect more taxes at the BIR and higher duties at Customs if we become more serious in curbing and punishing tax evasion and smuggling.”
Why do I say Villar was rhetorical where Aquino was sober?
Villar, in vowing zero tolerance of corruption, refrained from giving specifics. On the other hand, Aquino pointed to actual programs that already existed but hadn’t been implemented: “The ideas to improve tax administration and to control smuggling have been there for some time and some programs have been initiated in the past. One of these successful programs was the RATE or Run After Tax Evaders. In fact, some of the people at the Department of Finance and the BIR who have tried to implement reforms before are with us now, and together with reform-minded career executives, we intend to put their commitment and talents to good use under my administration.”
In other words, if fixing the revenue problem requires fighting corruption, then the logical first place to look is where efforts have succeeded in the past – or failed because otherwise good anti-corruption plans and programs ended up moldering on the shelf because the present dispensation in turn dispensed with fighting corruption. As Aquino told the MBC, “In this effort, we will not be starting from zero. Be assured that those smugglers and evaders are not faceless and unknown entities.”
Villar, on the other hand, declined to be specific, granting himself a crowd-pleasing rhetorical latitude without giving anyone any means to pin him down later on down the line.
At the heart of that study in contrast is their view of what a president’s approach to fighting corruption should be. Again, Aquino was specific: “My budget team estimates that for 2009 alone, around P280 billion of our national budget was lost to corruption. If we take the years 2002 to 2009, the total estimates exceed one trillion. Estimates vary, but everyone agrees that the numbers are huge, he told the MBC. Villar sidestepped the issue altogether: again, he preferred to float around on the level of the purely rhetorical.
He did put forward political Wowowee: “If elected; Large contracts can be bidded out and televised for all to see. This would send a message that we mean business.” In this, he at least displays a kind of consistency: to substitute media fanfare for authentic institutional scrutiny.