There\u2019s more than enough money for all the COVID-19 response we\nneed \u2013 the Duterte administration just has to take the side of the people and\nstop being so scared of the rich. <\/p>\n\n\n\n
The Philippines is in the middle of its worst public health and\neconomic crisis<\/a> in decades, possibly even in its history.\nThe social, economic and health measures needed to deal with this are\nundoubtedly expensive. But are they unaffordable?<\/p>\n\n\n\n Hangin<\/em><\/strong><\/p>\n\n\n\n The government seems to think so. The president famously said that\nthe government does not have enough money to respond \u2013 \u201changin lang iyan<\/em>,\u201d\nhe lamented. <\/p>\n\n\n\n The rest of the Inter-Agency Task Force for the\nManagement of Emerging Infectious Diseases haven\u2019t been as blunt but they\u2019ve\nbeen acting that way. The social welfare department has, in effect, been\nrationing already stingy cash aid with unduly strict requirements. The health\ndepartment isn\u2019t testing, tracing, isolating and treating as much people as\nthey should for want of resources. <\/p>\n\n\n\n The finance department is at the helm of the\ngovernment\u2019s economic team. It is voting with its feet \u2013 its Philippine Program\nfor Recovery with Equity and Solidarity (PH-PROGRESO<\/a>) and stimulus<\/a> plans don\u2019t give income\nsupport for tens of millions of cash-strapped families beyond the lockdown.<\/p>\n\n\n\n Unfortunately, strangely affirming the\nimportance Karl Marx gives to the economic base of society, the economic\nmanagers are too decisive. The finance department is also in charge of revenue\ngeneration. If it says there isn\u2019t any money, then the rest of government won\u2019t\nhave any money. Which explains where the president\u2019s hangin<\/em> comment came\nfrom.<\/p>\n\n\n\n But is there really no money to be had?<\/p>\n\n\n\n The plan<\/strong><\/p>\n\n\n\n But before looking into that, a more basic question \u2013 how much\ndoes the government really need? Four months into the pandemic, it\u2019s still not\nactually very clear. PH-PROGRESO is presumably the national government\u2019s plan\nbut this doesn\u2019t include what must also be considerable efforts at the local\ngovernment level. <\/p>\n\n\n\n The four-pillar PH-PROGRESO also has to be interpreted carefully\nbecause the finance department adds up actual spending, loans and guarantees,\nforegone revenue, financing, and additional liquidity to come up with an\nimpressive looking grand total of Php1.74 trillion.<\/p>\n\n\n\n As it is, it looks like there\u2019s only Php506 billion in actual\nspending. This includes Php321.6 billion in emergency support, Php133.7 billion\nin loan and credit guarantees, and Php50.7 billion for health measures.<\/p>\n\n\n\n The balance of Php1.24 trillion is actually composed of tax cuts\nand other foregone revenues (Php142.8 billion), liquidity released into the\nsystem by central bank measures (Php233 billion), and financing mostly from new\ndebt (Php861.8 billion). Put another way, the government doesn\u2019t actually need\nto raise funds for all these items accounting for 71% of the \u2018grand\u2019 total.<\/p>\n\n\n\n So where to get that Php506 billion that will actually be spent? <\/p>\n\n\n\n The Php861.8 billion in new financing of PH-PROGRESO \u2013 Php436.9\nbillion from official development assistance (ODA) and Php419.4 billion from\ngovernment bonds \u2013 is presumably a source. <\/p>\n\n\n\n But the program also mentions up to Php673 billion freed up from\nexisting budget items and so not really needing new financing or revenue sources.\nThis is from the 2019 and 2020 national budgets, off-budget items from\ngovernment-owned and controlled corporations and government financial\ninstitutions, and private sector contributions as well as from \u201cfinancial\nsector, monetary policy, regulatory relief\u201d. In his last weekly report to\nCongress, the president cited raising Php257 billion already from discontinued,\nabandoned, reprogrammed, reallocated and realigned items in the 2019 and 2020\nbudgets.<\/p>\n\n\n\n Looked at in this way, it appears that the government has come up\nwith a reasonably prudent plan.<\/p>\n\n\n\n Poor pay for meager response<\/strong><\/p>\n\n\n\n But appearances can be deceiving. There are two problems here. <\/p>\n\n\n\n The first is that the planned Php506 billion in actual spending\nfalls far short of being a sufficient response. The COVID-19 response needs to\nbe much more comprehensive and ambitious. The combined cost of the range of\nhealth measures, emergency relief, income support, and enterprise support\nneeded is likely more in the order of Php1.5-2 trillion. <\/p>\n\n\n\n Clearly, the perceived lack of funds is a major binding constraint to the broader response that is really needed and, indeed, even just a larger COVID-19 response than at present. This self-imposed limitation gravely undermines the public health response, risks undue infections and deaths, and will mean socioeconomic difficulties on a massive scale.<\/p>\n\n\n\n Which leads to the second problem. Meager as the response is, the\npoor are paying for it more than they should \u2013 through debt and higher taxes \u2013\nwhile the rich are paying much less than they can.<\/p>\n\n\n\n Most of the Php861.8 billion in financing of PH-PROGRESO is\nactually new and additional debt that will be paid for from taxes. Only a tiny\nPhp404 million of this financing are grants and the rest are ODA loans and\ngovernment bonds. The government has already been reported as seeking US$5.7 billion<\/a> in foreign loans for its COVID-19\nresponse. To date, the finance department reports US$4.9\nbillion<\/a> in COVID-related foreign debt. <\/p>\n\n\n\n The taxes to pay for this debt are disproportionately borne by the\npoor with their low incomes. Especially after the Tax Reform for Acceleration\nand Inclusion (TRAIN) Package 1 of 2017, the country\u2019s tax system is more regressive<\/a> and consumption tax-oriented than it\nhas ever been.<\/p>\n\n\n\n The self-imposed debt trap even to so-called development agencies\nand friendly governments is glaring. The Duterte administration is programmed\nto pay US$1.7 billion<\/a> in debt service to multilateral\nand bilateral agencies \u2013 especially the World Bank and Asian Development Bank \u2013\nthis year. These are also the very agencies it has borrowed an additional US$2.5\nbillion<\/a> from to respond to COVID-19.<\/p>\n\n\n\n Taxing consumption<\/strong><\/p>\n\n\n\n The government is also quick to tax consumption including of the\npoor. Consumption taxes are inherently regressive in being paid the same by\neveryone regardless of how poor or rich they are \u2013 as opposed to direct\ntaxation of income and wealth which is more progressive. <\/p>\n\n\n\n The administration has already hiked tariffs on imported oil\nproducts by 10%<\/a> to raise funds for dealing with the pandemic.\nThe planning agency, headed by a former finance department official, is already\nproposing higher consumption taxes<\/a> that will add to the\nburden of poor and middle class families.<\/p>\n\n\n\n This includes a digital economy value-added tax proposal which\nadds a Php50 billion tax burden on online consumers over 2021-2023, higher\ntaxes on sweetened drinks and junk food adding a Php22.7 billion burden, and a\nhigher Motor Vehicle Road Users\u2019 Tax adding a Php40 billion burden.<\/p>\n\n\n\n Increasing taxes on low-income families amid a recession would be\nperplexing if the insensitivity of the Duterte administration and its economic\nmanagers when it comes to taxes were not already well-established. They are\nonly being hugely opportunistic in exploiting the COVID-19 crisis to push their\nlong-standing TRAIN agenda of raising consumption taxes on poor and low-income\ngroups while reducing taxes on the rich.<\/p>\n\n\n\n It\u2019s all a bizarre repeat of TRAIN where the poor are made to pay\nmore so the rich can pay less. This time around, amid the COVID-19 crisis, the\nrich will benefit from the biggest corporate tax break in Philippine history. <\/p>\n\n\n\n TRAIN Package 2<\/a>, comically renamed Tax Reform for Attracting Better and High-Quality Opportunities\n(TRABAHO) bill, soberly renamed the Corporate Income Tax and Incentives\nReform Act (CITIRA), and now opportunistically renamed the Corporate Recovery\nand Tax Incentives for Enterprises Act (CREATE), is being primed for rapid\nlegislative passage. The Duterte administration is giving up Php667 billion<\/a> in potential COVID-19 response\nfunds to boost corporate profits.<\/p>\n\n\n\n Tax the rich<\/strong><\/p>\n\n\n\n So where can funds for the comprehensive COVID-19 response needed\ncome from? From the very same sources that funding for national development\nshould come from \u2013 the accumulated wealth and income of the rich.<\/p>\n\n\n\n The pandemic has seen the ideas of solidarity, unity and\ncompassion raised repeatedly. Beyond spontaneous acts of charity, paying higher\ntaxes is putting money where your mouth is.<\/p>\n\n\n\n In our population of 108 million, an estimated 596 Filipinos<\/a> each have wealth of some Php2.5 billion pesos or more. This includes the 50 richest Filipinos whose combined wealth of around Php4.1 trillion<\/a> is, by IBON\u2019s estimates, more than what the poorest 71 million Filipinos own combined.<\/p>\n\n\n\n There\u2019s no reasonable argument that taxing their wealth above Php1\nbillion will adversely affect their well-being and welfare. A wealth tax of 1% on wealth above Php1 billion, another 2%\nabove Php2 billion, and another 3% above Php3 billion will raise Php236.7\nbillion annually from these 50 richest alone. They are not going to be spending\nthis anyway versus the huge social, economic and health returns from\nusing this for COVID-19 response.<\/p>\n\n\n\n Other tax measures can also be considered. A two-tiered corporate\nincome tax scheme with higher taxes on large firms and lower taxes on micro,\nsmall and medium enterprises can be designed to generate about Php70 billion\nannually. Similarly, a personal income tax scheme with higher taxes on just the\nrichest 2.5% of Filipino families can raise about Php127 billion annually.<\/p>\n\n\n\n These are illustrative figures for now but the Duterte administration can come up with more precise figures if it was so inclined. There are technical challenges but these are not insurmountable and no reason not to try. <\/p>\n\n\n\n A wealth tax, higher taxes on large corporations, and higher taxes on the richest Filipinos are the most rational sources of revenues for COVID-19 response and development. <\/p>\n\n\n\n Does Congress have the political will for these? Sadly, our senators and representatives, looking to the 2022 elections already, are the biggest political won\u2019t.<\/p>","protected":false},"excerpt":{"rendered":" COMMENTARY<\/p>\n There\u2019s more than enough money for all the COVID-19 response we need \u2013 the Duterte administration just has to take the side of the people and stop being so scared of the rich. <\/p>","protected":false},"author":13,"featured_media":9689,"comment_status":"open","ping_status":"open","sticky":false,"template":"single-withbanner.php","format":"standard","meta":{"_acf_changed":false,"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"categories":[2048,2050],"tags":[2274,2199,2218,2273,347,522,521,1077,1006,2275],"class_list":["post-9687","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-banner","category-commentary-features","tag-corporate-recovery-and-tax-incentives-for-enterprises-act","tag-covid-19","tag-covid-19-response","tag-create","tag-duterte-administration","tag-progressive-tax","tag-regressive-tax","tag-tax-reform-for-acceleration-and-inclusion","tag-train","tag-wealth-tax","wpautop"],"acf":[],"publishpress_future_action":{"enabled":false,"date":"2026-07-23 14:13:38","action":"change-status","newStatus":"draft","terms":[],"taxonomy":"category","extraData":[]},"publishpress_future_workflow_manual_trigger":{"enabledWorkflows":[]},"_links":{"self":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9687","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/users\/13"}],"replies":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/comments?post=9687"}],"version-history":[{"count":3,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9687\/revisions"}],"predecessor-version":[{"id":9692,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/posts\/9687\/revisions\/9692"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media\/9689"}],"wp:attachment":[{"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/media?parent=9687"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/categories?post=9687"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.ibon.org\/tl\/wp-json\/wp\/v2\/tags?post=9687"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}