Budget and Taxes

*  BusinessWorld  February 20, 2023. --------- “The prodigal perverts by not confining his expense within his income, he encroaches upon his capital… By diminishing the funds destined for the employment of productive labor, he necessarily diminishes the quantity of that labor which adds a value to the annual produce of the land and labor of the whole country.” — Adam Smith, The Wealth of Nations (1776), Book 2 Chapter 3, Of the accumulation of capital, or of productive and unproductive labor Among the displeasure by the public of the huge and elaborate government bureaucracies, both national and local, is that they produce very little except more regulations, restrictions and prohibitions, require more taxes, fines and penalties. So the public desire less bureaucratic restrictions and taxation, more free enterprise and competition. Reforming the government bureaucracy has been tried in many administrations before but did not prosper. Here are 10 things about the bureaucracy an...

* BusinessWorld Feb. 13, 2023. ------------ Last week, several important pieces of news and events came out. I am summarizing them here. 1. The Philippines inflation rate was 8.7%.  The Philippine Statistics Authority (PSA) released the January inflation data last week, and the number is indeed bad. But last year, Thailand and Singapore also experienced inflation at 14-year highs, South Korea hit a 24-years high, Japan has a 41-year high. The main contributors of the 8.7% inflation rate (the highest since November 2008) are from housing, water, electricity, gas, other fuels, transport, and food. These are basic necessities so even if the Bangko Sentral ng Pilipinas (BSP) interest rates further rise from the current 5.5% (only 2% last April) to 10%, people will still spend for them. The appropriate policies are to encourage more supply of those goods — cement, steel, electricity, water, etc. — both through domestic production and trade liberalization. 2. Low unemployment rate despi...

*  BusinessWorld  January 30, 2023. -------------- Continuing the “Top 10” economic issues being discussed in this column, this 8th installment will tackle one huge elephant in the room, the ever-rising taxpayers’ burden which is the military and uniformed personnel (MUP) pension system. Here are 10 issues that Philippines taxpayers and public finance researchers should consider. 1. Government civilian personnel contribute for their future pension, MUP do not. Government doctors, nurses, teachers, engineers, agriculturists, etc. Accept the additional deductions from their monthly pay that go to the Government Service Insurance System (GSIS), the MUP do not. Taxpayers pay for active service MUP salaries and other compensation, then when they retire, taxpayers again have to pay for their pension — and the scheme is egregious. 2. The amount is huge, P65 billion/year a decade ago, P130 billion this year. In an article written a decade ago by Benjamin Diokno (now Finance Secretary)...

*  BusinessWorld , January 26, 2023. ----------------- The Philippine Statistics Authority (PSA) released today two important reports, the 4th quarter — and hence, full year 2022 — GDP, and December — and hence, full year 2022 — trade data. These are the trends that we see. 1. GDP growth in 2022 is 7.6% led by investments and household consumption.  On the demand side, household consumption has the biggest share, 73%, of GDP or gross domestic product (a monetary measure of the market value of all the final goods and services produced and sold in a specific time period), and it grew 8.3% last year. Investment has a 24% share of GDP and it grew 17%. 2. Government’s share in GDP is rising.  In 2016-2017, the share of government consumption was only 11% of GDP — it went up to 15% in 2022. Since government spending is financed by taxes and borrowings, this means that current and future taxes and debt payment will increase, not flatline or decline. 3. The Services sector, led b...