4. The Government cannot spend its way to Prosperity
The Philippines was named after King Philip II of Spain. During his reign, Spain was the foremost Western European power. Spain was at its zenith of influence and power, directing explorations all around the world and settling the colonies in all the known continents.
Philip II was a profligate spender, the result of which caused the decline in Spain. He financed many expensive expeditions, and also created the Spanish Armada, which after its defeat by the English, Spain was never able to recover. He was the first ruler who declared bankruptcy. As if that was not enough, he actually went officially broke at least four times.
Our country was not only named after him, but we have inherited his profligacy.
The bulk of government spending is not on capital projects, but on pork barrel. Pork barrel refers to projects whose main goal is to appease and please constituents and where return of investment is unclear. 40% of the total collections of the government goes to IRA ( internal revenue allotment) which is divided by the province, municipalities, cities and barangays. A significiant percentage goes to the office of the president, the senators, and the congressmen. Another 20% goes to debt servicing, and a significant part goes to the salaries and maintenance of its huge bureaucracy, which has increased by leaps and bounds every year
Do you wonder why the tax man is so unreasonable? VAT went from zero to 12 percent in 20 years, and they have doubled their collections the last 9 years even when growth was minimal, and yet more money is needed to feed the growing monster. We are already on our 12th year of record deficits.
Government is not investing much in the future, and there is almost none left for business and citizens to invest for the future either.
May 20th, 2010 at 4:14 am
The nature of democracy is for the government people to spend money.
What politician in his right mind would leave the position with lots of money so that his successor can spend at will? That will only help the successor look good.
The record has been that most people leave their positions with burdensome debts — they tend to spend as much as they can, and borrow to the hilt.
May 21st, 2010 at 8:45 am
Wilson, if there had been less corruption in the Philippines and the government able to collect correct taxes and duties, the VAT would not have been necessary. Even just a little less corruption and a little more collection efficiency…. Gov’t will argue that new airports, and infrastructure (however limited) is investment in the future. However, these activities do not seem to follow an expansive and scaleable economic strategy…. Our gov’t seems to lack the ability to plan extensively – and implement these plans.
May 23rd, 2010 at 3:52 am
This would have to be our country’s biggest problem, corruption. if our national leaders would just be able to allocate more money towards improving our country’s infrastructure, education and be able to properly attract foreign investors to invest in our country, instead of spending on the “Pork Barrel” i’m sure we will be able to get that “Economic Boom” we so desperately need.
May 25th, 2010 at 9:35 am
I think the government is collecting enough. As I said, its collection doubled the last 9 years. It is just that they are spending too much. I will give some more definitive figures on subsequent articles.
May 30th, 2010 at 4:43 am
the reason the pork barrel has risen is to feed the democracy we are living with. however China seems to prove that government spending is the only strategy left for growth especially in this global financial crisis…
but yes, you are correct in our assumptions…
change the consitution first by re evaluating and process reform for the comelec, powers of the president, let us not allow personalities rule the country but stregthen political parties and platforms and have the best with the mandate of the people lead and be prime minister…
ah yes, let us not forget reform the judiciary which is plagued with corruption and inneficiency
July 13th, 2010 at 8:59 am
Corruption is endemic in any society. Even the super countries are not free from this issue despite their advance systems. When an ordinary employee either with the private or government, gives his office issued ballpen, or even a sheet of his yellow pad paper purchased by the office for his use, to his son – it constitutes corruption!
So many laws have been made and we do not need stricter laws. We simply have to say NO and stand by that decision. Do we have the will? Do we have the steadfastness required? Honestly, will a lowly clerk whose salary is not even enough to feed himself much less his family be strong in conviction to say no?
Taxes are the bloodline of the government, without which the government will simple cease to exist and anarchy reign supreme. Responsible taxation, both in the collection and the payment. Transparent budgeting and audit and a strong penalty system for those that transgress.
If only we can impose the kempetai justice without out CHR Chairman crying foul on a million watt microphone…
July 15th, 2010 at 10:06 am
A government spending its way to independence -a glimpse of an untold episode in our colonial history – After its defeat, Spain sold the Philippine colonial territory to America for 20 million dollars in a “contract of sale” also known as Treaty of Paris. Years later, in the 1930s, Philippines then a Commonwealth partner of America bought its independence and paid 150 million dollars. The US used part of the proceeds to finance the colonial administration in the Philippipnes. The independence package was delivered in 1946.
Business interests in the US had clamoured an earlier independence of the Philippipnes in 1935 or 1940, so that the latter could already be taxed of its products being exported to the US. The strongest lobbiest then was the US dairy industry threatened by the export of huge volumes of Philippine coconut oil that compete with American dairy and margarine products.
Unable to stand on its own as an independent nation ( the Americans believed) they did not let the Philippines go that early. The US, however, edited the idea by imposing an excise tax (3 cents per pound) on all export of copra and coconut oil destined to any US territory. With its burden in other colonies like Cuba, the US did not have there sources to finance the administration of the colonial government in the Philippines. Neither was it willing to adopt tax reforms for fear of antagonizing the revolutionary fervor of potential tax payers like the landlords.
Thus, the coconut excise tax enacted by US congress as amendment to the US Revenue Act of1935 was a convenient remedy to raise revenue to finance the national budget of the Philippine Commonweath Government from 1935 to 1946.
Not less than 150 million dollars was levied by the US government, which was remitted in trances to the Commonwealth government for a period of ten year. The money was used to acquire estates for homestead and residential areas, most notable of which are now the areas covered by Quezon City. The remitted tax financed the opening of frontier lands in Mindanao, built roads and bridges, hospitals, schools, feeding and rehabilitation centers, debt repayment, and other sovering obligations. About ninety per cent of the annual commonwealth budget was funded by the proceeds of the coconut excise tax.
The irony is that, as a condition for the return of the money to the Philippipne, not a single cent shall be used to subsidize or otherwise develop the coconut industry where the tax emanated.
The exclusion of the coconut industry from the boon was a determination to spread the financial resource for general economic adjustment measures rather than assisting a single industry that competes with American business interests. Also, the Americans were quite conscious of how other industries in the Philippines squandered subsidies and loans from the government. That is another story.
Practically, the coconut tax or the coconut industry for that matter, then enjoying a lucrative gain in the vegetable oils and fats market assumed from the colonial father the obligation of maintaining the colonial household as by paying the costs of economic adjustment measures preparatory to Philippine independence in 1946.
Official records disclosed, however, that the excise tax continued to be levied by the US on Philippine coconut exports until 1953 despitethepost indenpendence parity agreement between the twocountries. A record of milions of dollars more in the US treasury for the account of Commonwealth government has not been transferred to the Philippines. Anolther interesting story.
I have checked the reliability of the foregoing account with pertinent government agencies. True enough, the story fairly represents the truth, or at least the gist of a treasure truth.
I have learned also that the coconut industry now is the biggest agri commercial crop earning an average revenue of One Billion Dollars a year chiefly through its export of coconut oil, oleo chemicals and desiccated coconut products.
The informed people in the agencies are saying that another One Hundred Fifty Billion Pesos was screwed from the coconut farmers in that infamous local version of coconut levy collected during the marshall law regime, and that the money is presently trapped and entangled in various high profile investments.
Accordingly, the dividend from the investments is yielding not less than two billion pesos a year. In an attempt to recover the levy or what isleft of it, the Government filed suit and being litigated for more than twenty years now.
They added that though the Courts have ruled that the coconut levy and all its earnings and assets are public funds, owned by government in trust for the benefit of the coconut farmers, not a single government audit has been done to give it a public attribute. On the contrary, they said, all the assets and monies are still in the control and dispositon of private hands.
With this kind of money, the coconut industry can help the government spend its way to prosperity, at least the prosperity of the coconut farmers who are known to be destitute and poor despite the abundance of the farms they toil.
I wonder what the government or the new administration intends to do with this spectable. Has anyone made a case study? Please share me your views.
July 19th, 2010 at 11:04 am
It’s really true. I agree on this article. We are conquered by the Spaniards long ago under the rule of Philip II. We, Filipinos are known to have such attitudes which we have inherited from them especially being extravagant. In the recent government in our country, politicians usually ask for financial aid in order to finish a certain project which eventually became their pork barrel. They use the money but use only a little amount for the project. Although they have done their projects, but they have not finished it. They usually keep the money, which should be spend for the project, in their pockets. I hope that our government now, especially our president’s administration may spend it wisely. Although, we have to accept that they corrupt money. Hope they may think already of our country’s debts and that they will already work for the betterment of the country.
December 30th, 2010 at 11:32 am
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