050207: Editorial: Not by wages or taxes alone

Editorial:

Not by wages or taxes alone

TWO separate Labor Day developments indicate a similar mindset among both government and workers—even though they normally have disparate views and interests. One school of thought in the government is so worried about the failure of the fiscal program that, this early, these people are floating the possibility of “new taxes” being introduced down the road. If they are serious about this, it would be perfectly correct to presume such will be sprung after the elections. On the other hand, there’s the working class, which views anything outside of an across-the-board wage hike as mere crumbs, or completely useless to the welfare of ordinary folks. Both views—that only taxes could help government meet its fiscal goals; and on the other hand, that nothing short of a wage hike is good for workers—are the product of lax, uncreative thought. Right after President Arroyo delivered her May 1 speech, union leaders and government critics were pooh-poohing her list of “nonwage benefits” as virtually nothing because, in their view, only cash (read: a substantial across-the-board wage hike) would truly help workers in these hard times. To be fair, it is for them to say those things because unions are almost always primarily attuned to that sole direction, i.e., that workers can best be helped by salary increases. And yet, it seems unreasonable, and inadvisable for the working class to simply brush aside or reject the government’s nonwage package without trying to even study them closer. We surveyed quickly the initial list of benefits announced by the President, and, while some of her job-creation claims are debatable and while not everything in her blueprint is original or an additionality—meaning, it’s already being done so why count it?—several of the initiatives listed qualify as serious efforts to ease the economic burden of the common man. Who can argue against greater support for the Pag-ibig fund and the drive to encourage workers to draw housing loans when interest rates are at all-time lows and repayment periods have been stretched? Who can argue against income-tax relief for minimum wage earners?  Who can argue against widening the social security net for informal workers, who make up the bulk of the labor force? We leave it to the labor experts to separate the chaff from the grain in her Labor Day package in the next few days. Unfortunately, it’s not only labor that seems to be wearing blinders. Last week, outgoing National Treasurer Omar Cruz dropped a hint that, if government cannot put its act together, it may be tempted to call in its “new-taxes” option sometime this year, even though it still has to convince many people up till this day that the E-VAT is a progressive kind of tax and not a burden for ordinary blokes like us. On Labor Day, another finance official indicated—as our front-page story reports—that policy planners cannot rule out all likelihood of the adoption of new tax measures when Congress reconvenes soon after the mid-May elections. Of course there is a sop: the Department of Finance considers the imposition of new taxes as a last card, or one to be embraced only if revenue flows were such that the anticipated budget balance in 2008 was at peril.  “New taxes are a last resort, to be pursued only when we have done everything and revenue flows remain insufficient,” Finance Undersecretary Gil Beltran was quoted as saying just before the Labor Day. Beltran, the chief policy planner at the DOF, was reportedly intrigued by the admission of outgoing Treasury chief Cruz that revenues flow this year and next have virtually maxed out and cannot be expected to yield more than they already have. If this is so—and here we don’t want to say we told you so—then recent developments indeed have serious fiscal implications, beyond just the policymakers’ worry that the target of balancing the budget by 2008 will be derailed. Will government retreat from its vaunted drive to compensate for the past few years’ underspending and go full-blast on its infrastructure program, the one great hope for letting the economy achieve even just moderate growth this year? One hopes not. On the other hand, this early there is concern that the unfettered election-campaign spending may upset the fiscal cart this early, leaving people holding the proverbial empty bag of promises and a huge bill of expenditures afterwards. Just a thought, but certainly reason for anxiety. Meanwhile, Mr. Beltran wonders aloud if the goal to lift the tax effort, the percent of local output or the gross domestic product, from an average 14.8 percent to 15.2 percent this year at least, and to 17 percent by 2010, is really achievable. The reason for skepticism: the revenue-collection agencies have signaled a certain difficulty in meeting collection efficiency targets. Note that they already missed the first-quarter collection goals, subsequently causing the government to miss by P7 billion its budget deficit goal. Meanwhile, as we’ve noted in this space recently, the revenue agencies are also mired in problems implementing the lateral attrition law, which rewards revenue overperformers and punishes those who chronically miss their targets. Despite the “positive” economic fundamentals that the administration likes to tout these days, the fact is that the fiscal house is in peril—and it doesn’t help one bit when people know that at the back of its mind, the government entertains new taxes because it doesn’t have the will or the creativity to use existing tax laws to meet its targets. Please, don’t even think about it—not even as a last resort or a joke.

 

http://www.businessmirror.com.ph/05022007/opinion01.html