Posts Tagged ‘eVAT’

As expected, president Gloria Macapagal-Arroyo’s State of the Nation Address (SONA) was a litany of accomplishments and a list of motherhood intents. It was obviously given within a political framework of offsetting her unpopularity and defending her political position.

The most glaring tendency appeared when she started blaming the global oil and food crisis for the local crisis regime of high prices. Later on, it appears that she cited accomplishments by her former appointees who had just been booted out and replaced by her more loyal people. This was the case in the Ombudsman and in the Social Security System–two institutions whose leadership were replaced at the height of their credible performance.

She made a spirited defense of the extended Value Added Tax (eVAT). Basically, she argued that it taxes more the rich and that, if rescinded–even if only for oil and oil products, it would not necessarily lead to relief from the high price regime. It, she averred,  would only deprive the government of necessary funds for targeted subsidy and other services to the poorest people.

There is a half-truth hiding in these arguments. EVAT on oil and oil products, even if the majority of direct consumers are the rich, is invariably passed on by them to the poor because of their control over the levers of production, services, and exchange. This is why it is called a regressive tax.

EVAT therefore leads to higher prices of all commodities affected directly or indirectly. A simple suspension or rescinding of the eVAT on oil and oil products will therefore ease pressures where it counts–on higher prices of all products related to or influenced by its price. Progressive income taxation can easily replace eVAT through cancellation of tax exemptions for many big businesses, banning of tax holidays, and pegging the tax on corporations to their real profits. If sacrifices have to be made, it should be made by those who are in position to give up more money.

Agrarian reform law extension is a desirable target. So are the various services enumerated for the poor. However, the inclusion of the pro-Catholic position for natural family planning as the whole of government policy on population diluted any progressive reform content of these proposals. It betrayed the GMA administration’s fear of her unpopularity and its obvious cultivation of the Catholic church hierarchy to prevent people power or prevent the translation of the economic crisis into a serious political crisis.

In sum, the well-choreographed SONA speech by president Macapagal-Arroyo is a well-calculated pitch for her continued political survival. Nothing more, nothing less.

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This Monday, president Gloria Macapagal-Arroyo will deliver the traditional state-of-the-nation address. Malacañang already hinted that it would propose a national social welfare program and a policy on population. On its face, this translates into a hands-on handling of the current economic crisis.

A national social welfare program addresses the current high price regime and the general poverty question. The population policy will ostensibly address the regulation of population growth commensurate to the limitations of resources and economic capacity of society.

The talk here is of a Brazil’s Lula-type or just even the Thailand’s Thaksin-type of subsidy to the poorer sections of the population. Essentially, in Brazil’s case, this means giving government subsidy to the poor in return for their investment in the future (education) and in production (household-level). The Thai counterpart subsidizes rural poor in basic services.

In the two cases, the two leaders started from a popular base and their programs encompass a comprehensive strategy for narrowing the gap between the rich and the poor. Furthermore, they did it with considerable funds at their disposal, controllable corruption, and relative freedom from the pressures of economic and political crisis.

In the Philippine case, the subsidies announced so far–and probably those that will be announced in the SONA–are in the nature of palliatives. They are designed as high-impact short-term initiatives to address immediate effects of the high price regime and the gross unpopularity of the president. These are not designed for sustainability or as a development strategy.

The major source of these subsidies is the government income from the eVAT, particularly the estimated P70 billion windfall from the astronomical rise in prices of oil and oil products. This is the reason why the president has been so far reluctant to let go of the eVAT, even only on oil and oil products.

The eVAT connection is the Achilles heel of Malacañang’s social welfare program. The eVAT role in the misery of the common tao is already well-understood by them–an understanding that wrecked former senator’s Ralph Recto’s political career.

However, the available funds–even with eVAT’s windfall–will not be enough to make a dent on the people’s misery or on the unpopularity of the president. The pervasive political corruption may well blunt further the impact of the proposed national social welfare program, or even deal it a fatal blow.

The immediate high-impact character of the president’s SONA promises will be seen in her inclusion of the population issue. Malacañang, in this case, is expected to take the side of the Catholic church and support a non-program of natural family planning and more procreation. This highly-pragmatic approach is designed to pander to the bishops as well as distract their attention from the various GMA machinations in the works, such as the charter change initiative and possible repression regime.

The SONA therefore is expected to be the same as the SONAs of president Macapagal-Arroyo in the past years–meaning, they all address the same issue: her political survival. Not the problems of the people, nor the requirements of strengthening Philippine democracy.

SONA topics may change but the framework will remain. GMA’s SONA–still-will be a SONA for all seasons. A singer singing the same song.

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