Govt. & Taxes, Philippines

Friday, June 22, 2007

New taxes vs. Privatization

My former boss, both in Congress in the early 90s, and in the private firm Think Tank, Inc., now DOF Secretary Gary Teves, has been under attack by his former HS classmate and BIR Commissioner under him, Commissioner Bunag. Main rumor is that when Pres. Gloria's Team Unity Team Arroyo (TUTA) was nearly wiped out in the last Senatorial elections, she was unhappy (of course) and now attempts to come up with a "new face" in her government by replacing some officials who were deemed to be "less productive".

I don't know if Commissioner Bunag was directly sacked by the President or what, but he made some rather harsh parting shots like "to reform revenue collection agencies, start from the top incl. Sec. Teves for his command responsibility." A report from BWorld today says that Sir Gary was hurting with those and other comments by the outgoing BIR Commissioner.

Personally, I don't care about internal dynamics (or inertia) in Malacanang how they will find money to finance the bloated government, from the Executive to Legislative to LGUs and GOCCs/GFIs. My concern is that they should not ever think of inventing or creating new tax measures again. Improve revenue collection of existing tax laws, fine. Simplify and remove redundant tax measures that complicate the business environment, much finer.

But how I wish to hear and read that Malacanang will privatize many of those GOCCs and GFIs, whether "good or bad" performing financially. A big portion of the public debts, both domestic and external, mushroomed because of those GOCCs, and GFIs, starting from DBP, CBP (now BSP), PNB, NPC, NFA, LRTA, and many others. So much money that could have been used for other social services were diverted to pay the debts of those government enterprises. Or so much money that should have remained in the pockets of Filipino households have been forcibly taken away from them (ie, confiscated), to pay for the debts and liabilities of those government enterprises.

Can Sir Gary possibly push such policy to raise more money for the DOF and Malacanang without resorting to more taxes, other government charges and fees? Or is such policy option ever entertained by Malacanang and the DOF in the first place? I don't know; maybe Batman or Spiderman knows.

Nonetheless, I don't think President Gloria can afford to lose Sir Gary at this time should the latter decide to leave the government. The number of honest and useful people in her government like Sir Gary is very small, I think. I'm no fan of President Gloria, but I keep my high respect for Sir Gary. I know him personally, I've worked with him on several instances, that's why I can vouch for his integrity.

Tuesday, June 12, 2007

Tourism development, minus government

Mactan, along with Boracay and Puerto Galera, could be the “Hawaii of the Philippines,”, though Mactan has a greater potential because of the existence of an international airport.

The role of government here is simple -- do nothing, except improvement of road infrastructure, and some peace and order function. All the rest can be done by the private sector -- putting up many hotels, shops, malls, private security, shuttle services, bring in more foreign airlines, etc.

Government should also abolish that stupid “travel tax” of P1,620 ($34.5 at P47/$). I see little or no “public service” being financed by this tax, since most if not all tourism services and promotions by the Department of Tourism (DOT) are financed by either annual appropriations given by Congress, or from fees charged by DOT- or PTA-owned hotels and tourism facilities.

The "airport terminal fee" of $16 is way high; it can either be cut by half or abolished. It's an additional tax, an additional revenue for the tourism and Malacanang bureaucracies, plain and simple. Honolulu airport, serving around 1M residents and tourists, is at least 5x as big that of NAIA 1 & 2 combined, and not charging even a single cent as "terminal fee". The same practice of zero terminal fee can be observed in other big international airports of Singapore, Seoul, KL, HK, Tokyo, etc. These airports make money from the hundreds of shops in the departure area, from the airlines, from advertising, etc., but not from the departing passengers.

With an extortionist mentality of Philippine government and bureaucracy, attracting 5M or more foreign tourists will remain a dream, at least in the next few years.

A friend from Cebu, Theodore Sy, commented the following:

“Noy, you are basically right about that "extortionist policy" of the government… During my recent trip to Europe, I am surprised to find that travel bureaus and agencies there NEVER ADVERTISE THE PHILIPPINES. They have posters about K.L. Thailand, Phuket, Cambodia, Vietnam, Beijing, Shanghai and all the nice places in asia..EXCEPT OUR POOR COUNTRY.

This is because Europeans are fed up with the way we Filipinos deal with tourism. We don't look at the long term by planning ahead and changing our culture of "extortionism". You know, it is even published there (travEl advisory) that japanese tourists get ripped off in Pagsanjan. They pay P250 for a boat ride along the rapids and midway, the boat operator stops the boat, demands USD50.00 per tourist or ELSE THEY PUSH YOU OVERBOARD!!! The japs are only too terrified and pay up, but the tragic thing is they
will never come back again…

Besides, our resorts are overpriced. You stay in Thailand resorts for 70% the price of a Philippine resort and you get much better accommodations. This is another reason why tourists shy away from our poor country.”

I was also surprised by this observation by Teddy. I got a feeling that the government tourism bureaucrats are among the promoters of extortionist and monopolistic thinking in the tourism sector. It’s possible that the tourism bureaucrats limit the supply of resorts and hotels by demanding some crazy and extortionist regulations like "DOT (or PTA) accreditations", and their corresponding taxes, charges, fees and thick paperwork. Not to mention the same regulations by the LGUs and other national government agencies.

The "political will" that I wish to see, is the "will to desist from too much intervention" . Those extortionist boatmen in Pagsanjan (and perhaps in the Hundred Islands, Boracay, etc.) arise because they got no corporate or entrepreneurial brand. You're a tourist, and you choose boatmen A, an assembly of fly-by-night operators perhaps, you get the risk of being held up while you're in the middle of the river or the sea. You choose boatmen B or C from a particular corporation/s, you get the assurance and quality of that company that their guys are not hold-uppers and extortionists. My experience and observations in the Hundred Islands, Puerto Galera, others areas show that it's government "protection" of small boatmen that inhibits the development of more modern boats, more courteous boatmen and tourism guys, more competition in the tourism sector.

Strong Peso: what to do with it?

A friend asked me about my position about the "strong" exchange rate. Because it's not translated in reduction in petroleum products or other commodities, and it's hurting both the OFWs and exporters.

My take on this is that there ain't much you can do about the strengthening peso. Its the old supply-demand dynamics.

Supply of $ to the country is faster than demand, as more OFWs remit their incomes back home, more portfolio investments inflow, and more foreign tourists coming too, perhaps.

Demand for $ lower than supply. One recent development is the weakening of US$ as the US government keeps piling up its public debt, due to perennial and endless budget deficit every year. In 2006 for instance, deficit was around $450 B. Many investors around the world are slowly dumping the US$ for the Euro, or chinese renminbi, or other currencies by emerging markets.

So, what to do with the strengthening peso? Nothing!
Perhaps if the exchange rate will fall from the current P47/$ to only P40/$, then there will be less outflow of Filipino nurses, doctors, managers, domestic helpers, etc. And people who cry "brain drain" whenever planes upon planes of Filipinos leave the country will probably sing "alleluiah".

About petroleum products prices, why they don't come down despite the strengthening of the peso -- the instabilities around the world keep petrol prices high. Venezuela nationalized all petroleum companies; hence, you dont know what Hugo Chavez will do next with his country's big petroleum deposits and supply. Then the US parading its battleships and aircraft carriers near Iran, and you have some talks that it may attack Iran to delay its nuke weapons program. Then Russia announcing that it may attack some European countries with missiles if the US' anti-missile shields are posted there.

Every instability translates to nervousness and sometimes irrational stocking up of petrol products, that drives prices up.