• Wasteful spending

    Tita C. Valderama

    Tita C. Valderama

    DOING AWAY with inefficient use of public money does not seem to figure out in the government’s program of increasing the budget for basic services such as infrastructure, education and health.

    The most convenient way for the government to fund its higher spending requirements is to raise taxes, of course.

    The ongoing budget process in Congress should have presented legislators with an opportunity to review page by page and line by line the proposals of the various government agencies in order to eliminate inappropriate or unnecessary spending, such as out-of-town training seminars in which participants spend more time frolicking on the beach and sightseeing than attending the seminar.

    Both the Senate and the House of Representatives have oversight committees mandated to review the performance of agencies in the executive branch, their programs, activities and policy implementation. It is within the legislators’ oversight function to identify poorly functioning programs and recommend their scrapping or consolidation of duplicative programs for prudent spending.

    Sadly, however, shrewd politicians see underperformers as potential recipients of their pork-barrel allocations, or whatever name they want to call it now, because they are easier to control and manipulate and the politicians end up getting a handsome share of the money that comes mostly from taxes. Some of them find outlandish ways to waste money on parochial and non-essential programs and activities.

    Nothing can be certain in this world – as one of America’s founding fathers, Benjamin Franklin, said – except death and taxes. It simply means all living creatures die, sooner or later. And if one passes on, the next of kin inherits his debts or assets, along with the relevant taxes, particularly if the deceased had acquired valuable properties or saved money during his/her lifetime.

    People say that if you want better service, you have to pay for it. It does not seem to hold true in the Philippines though, especially in government agencies plagued by graft and corruption.

    At present, the Philippines has the second highest personal and highest corporate income tax systems among the six original members and the largest economies in the Association of Southeast Asian Nations (Asean). But this does not mean we have the most efficient basic services in the areas of education, health, transportation, peace and order, among others.

    As I wrote in my column last week, the Duterte administration has proposed to Congress the lowering of personal income tax rates, but it goes further by also seeking to scrap some tax privileges and raise other taxes, such as the value-added tax, not only to recoup the forgone revenues from income taxes but also to generate about P600 billion more over three years.

    The previous administration was criticized for underspending on public infrastructure. This has been blamed for the horrendous traffic congestion in Metro Manila and other urban centers. The World Bank and the World Economic Forum had ranked the Philippines as the worst among the top five economies in Asean in terms of the overall state of public infrastructure – road network, airports, seaports, railroads, telecommunications, power, and others.

    To address this deficiency, the Duterte administration has vowed to raise the level of spending on infrastructure to ease the movement of people and goods across the country and into the international markets.

    Budget Secretary Benjamin Diokno had said that given the current state of the country’s public infrastructure, the government should spend the equivalent of at least 5 percent of the gross domestic product on public infrastructure every year in the next 10 years. Since 1986 until 2015, government investment in ‘public infrastructure and other capital outlays’ averaged a measly 2.3 percent of GDP, he said,

    Under the P3.35-trillion proposed budget for 2017, the first full-year appropriation for the Duterte administration, priority will be given to improving the construction of infrastructure by increasing spending to 7 percent of GDP, Diokno said.

    Next year’s proposed budget for infrastructure is P860.7 billion, or 13.8 percent higher than that of 2016. Of the amount, P355.7 billion was earmarked to fix and build road networks, railways, seaports systems and airport systems.

    Higher spending for basic services such as infrastructure naturally requires more funding sources, including new or higher taxes. That is why the administration’s proposed tax package seeks to raise more taxes while reducing the withholding tax on personal and corporate incomes.

    Should better public services be always funded by higher taxes imposed on the people? Do we always have to pay higher taxes, both direct and indirect, so that the government can raise more money to spend for improved services?

    I guess businessmen and professionals would not mind paying the correct amount of income taxes, instead of resorting to avoidance and evasion techniques, if they could witness, read, and listen, and experience less incidents of corruption in the bureaucracy, if they could navigate Metro Manila’s roads smoothly, and if they could get their permits and licenses without having to grudgingly shell out grease money.

    Before imposing new or higher taxes, which usually hit the fixed-income earners the most, the legislature and the executive branches should strive harder to put in place an efficient collection system for the higher-income brackets and to send tax cheats to jail.

    The Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC), the top two revenue-generating government agencies, have often been missing their collection targets, which is bad because that means widening the budget deficit, which, in turn, could mean more borrowings.

    The Philippines will continue to lag behind its neighbors in the Asean if it keeps the highest tax rates in the region. In that case, the Philippines will have the most uninviting tax systems among its neighbors as the region moves toward a borderless economic community.

    It is about time for the congressional oversight committees to buckle down to serious work and identify reckless and wasteful spending of the public money and pinpoint accountable persons to ensure that every peso of the taxpayers’ money in the government’s budget is judicially spent.

    Legislating a genuine Freedom of Information (FOI) Act to enable the public, particularly the media and watchdog groups, to gain access to records, reports and other public data, would also help in monitoring the performance of government agencies and determine the accountability of poor performers.

    The Commission on Audit (COA) must also have tighter pre-audit and post-audit authority to help stem fraud, misappropriation, and other forms of wasteful spending of public funds.


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    1 Comment

    1. Joshua Schneider on

      Tita, you have hit the nail on the head. Lets hope this administration takes a good lead from the years of President Ronald Reagan. Lower taxes, and low and behold you end up with more money. Democrats called it “Voodoo Economics”.

      I kind of like DU30 Economics!