Next president will face a fiscal crisis
Posted by akosistella on March 9, 2010
By Ernesto Herrera
In past debates and forums presidential bets seem to agree that whoever among them wins will certainly face serious fiscal challenges. The government is in the red and the business of operating it from day-to-day would be difficult to say the least.
President Gloria Macapagal Arroyo can brag about her accomplishments all she wants but the fact is she hasn’t been able to reverse the nation’s unsustainable long-term fiscal course driven primarily by heavy foreign borrowings and huge budget deficits.
Civil society groups have been calling for more fiscal responsibility from this administration since it took over but their calls have been unheeded. Now it would be up to the next president to do something about the government’s precarious financial situation.
Budgets and borrowings don’t normally hold the public’s attention as much as corruption scandals, but it should. Politicians and the public often ignore these huge drains on the budget, but they have devastating effects on the daily lives of Filipinos.
Vice presidential candidate and senator Mar Roxas said the GMA administration’s “profligate spending and borrowing binge” in the last two years will cost Filipinos an additional P50 billion a year, just to cover the 2009 to 2010 combined budget deficit amounting to P600 billion.
While public debt is increasing, the government is in a spending spree, Roxas noted. He said the P50 billion in interest payments would force the next administration to resort to drastic revenue-generating measures to keep the economy afloat.
The budget deficit reached P300 billion last year and another P300 billion deficit is expected this year.
“We have exceeded our deficit, which means government has again failed to meet its revenue targets. All taxes to be collected by the BIR and the BOC would now go to debt payments,” Roxas said.
A large chunk of the national budget is gobbled up by debt payments. Of the P1.541 trillion national budget for 2010, a total of P253.458 billion is earmarked to pay foreign debts.
Every peso or dollar we spend to pay our debts or just the interests of these debts means less money available for fighting poverty. It means less money to spend on health care, social services, the environment, housing and urban development, agriculture.
Has any of the leading presidential bets proposed to negotiate a debt payment moratorium or a debt swap? A better question perhaps would be, did all the money the government borrowed actually help Filipinos?
The Bangko Sentral ng Pilipinas said that the country’s outstanding external debt rose to $53.1 billion by the end of the third quarter last year, and yet in a SWS survey more Filipinos rated themselves poor and hungry than ever before. Even Joey Salceda, GMA’s economic adviser, admits more Filipinos are poorer now.
Another vice Presidential candidate and senator, Loren Legarda, noted how the Arroyo administration has been relying heavily on foreign borrowings to finance its infrastructure development and social services delivery.
“With annual tax collection always falling far short of required expenditures, the government resorts to borrowings from abroad to make ends meet. But who really benefits from the borrowing spree? It’s not the poor, definitely,” she said.
The present administration has put government in the red, but it’s the next administration’s problem how to get it back into the black.
Labor bucks GMA veto of OFW remittance tax abolition
The Trade Union Congress of the Philippines has assailed the Department of Finance for asking President Macapagal Arroyo to veto a provision in the proposed new Migrant Workers Act that exempts the money wired home by overseas Filipino laborers from the documentary stamp tax (DST).</p<
Malacañang should reject outright the DOF’s foolish and contemptible request. The DST on remittances has been a burden to overseas Filipino workers (OFWs) and their families here and it should have been abolished a long time ago.
A provision in the proposed new Migrant Workers Act, ratified by both the Senate and the House on January 18, excludes the cash sent home by OFWs from getting slapped the DST. The removal of the DST on the money wired home by OFWs would help drive down oppressive remittance charges, and put extra cash in the pockets of many households.
At present, under the Tax Code, all money transfers from abroad and payable in the Philippines, including those wired home by OFWs, are subject to the DST at a rate of P0.30 for every P200.
This means that OFWs pay a DST of P34.60 for every $500 or P23,065 (at $1:P46.13) that they send home. This is on top of the usual foreign and local bank fees, plus the P0.50 to a dollar margin that domestic banks are allowed when they pay out the remittance in pesos.
On the $17.348 billion (P800.263 billion at $1:P46.13) sent home by OFWs in 2009 via the banking system alone, the Bureau of Internal Revenue (BIR) collected a total DST of at least P1.2 billion. This year, assuming annual remittances grow by 10 percent to $19 billion, the BIR will be raking in another P1.3 billion in DST from OFWs.
This question really is, whether the P1.2 billion or P1.3 billion is better kept in the government’s pocket, or in the pockets of the families here of our OFWs. We say abolish the DST on the money transfers made by our OFWs, and let their families here keep the extra cash for them to spend. (Manila Times)