POSTSCRIPT / January 23, 2005 / Sunday

By FEDERICO D. PASCUAL JR.

Philippine STAR Columnist

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Can 'lateral attrition' weed out the crooks?

WIPED OUT: “The dearth in capable and effective political leaders being felt today is due to the fact that a whole generation of dynamic and proactive leaders was wiped out from the public sector when the Marcos dictatorship wielded absolute power for nearly two decades.”

Thus observed Senate Majority Leader Francis N. Pangilinan in the first forum of the Capampangan in Media Inc. (CAMI) held Tuesday at the Manila Pavilion. He was guest together with Tarlac Rep. Jesli A. Lapus, chairman of the House committee on ways and means.

“When absolute power was the rule, dynamic, independent-minded men and women of conviction shied away from the public sector and sought their own pursuits elsewhere,” Pangilinan said. “Many of our country’s best and brightest where either arrested and detained or they fled to escape the wrath of the dictatorship.”

The good news is that all that is now in the past. Since the restoration of democratic rule in 1986, a new generation of young political leaders has been emerging.

Many CAMI members see Pangilinan, 41, and Lapus, 53, as among the new crop poised to take more responsible positions in government within the decade.

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PARTY SYSTEM: Hand in hand with developing new leaders, Pangilinan also batted in the CAMI forum for the strengthening of the country’s party system. He noted:

“Nowhere in the world can you find a progressive country that does not have a strong political party or a strong party system. The United States has a strong two-party system. The giant China has a one-party system. In Europe you have multi-party systems. In other parts of Asia you have a strong LDP in Japan with a sprinkling of opposition parties, and in Taiwan it was the Kuomintang that lorded it over the Taiwan Economic miracle of the late 70s and early 80s. In Malaysia, it was and still is the UMNO.

“Whether it was in a democratic or authoritarian setting in Asia, Europe or the US, a strong political party or strong political parties were necessary ingredients in moving a nation forward.

“In the next three to six years, we must work on measures to strengthen political parties. We must provide them state subsidies similar to those in the US and Europe to loosen the grip of vested interests on political leaders.

“Legislation must also provide for parameters within which citizens and people’s organizations, and not only politicians and political leaders, become actively involved as members of the parties of their choice.

“Existing political groups and parties must evolve into genuine people’s parties that exist down to the grassroots wherein ordinary citizens are active participants and are program- and issue-based rather than personality-based as we see it today.”

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TURNING POINT: Lapus agreed with Pangilinan, adding that the strengthening of political parties as discussed by the senator from Sto. Tomas, Pampanga, was “the only option.”

The congressman from Concepcion, Tarlac, noted the urgency in the air, saying that the country is “in a dangerous turning point.” The senator also deplored the “poisoned atmosphere” in the last Congress, but reported a “sincere effort” among political leaders now to work together.

On the legislative agenda dominated by tax bills being pushed by the Arroyo administration, both legislators support the revenue measures meant to raise P80 billion to help plug the fiscal deficit.

Being money measures, they are initiated in the House then passed on to the other chamber. Anticipating the upcoming work, the Senate has started studies and inquiries into the tax bills.

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VAT DEFENDED: Lapus defended in the CAMI forum the VAT bill, well on its way to final approval in the House, that would raise the value-added tax from the present 10 percent to 12 percent.

“VAT is a consumption tax,” Lapus explained. “Hence, those with more money to spend will bear more of the VAT burden.”

Those who have less need not fear, he added, since “the consumption of the lower income classes is largely either VAT-exempt or procured from supplies that are outside the tax net or are not paying VAT.”

He cited a study of the National Economic and Development Authority showing that the poor pay less tax under VAT than those in the middle and upper income classes. Considered “poor” are households earning less than P60,000 annually.

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RICH VS POOR: The NEDA study showed that poor families spend 65 percent of their income on food consisting mainly of staples such as rice, fish and vegetables that are mostly tax-exempt. And when poor families eat out, Lapus said, they patronize food stalls that do not collect VAT.

He continued: “They also purchase their clothing and footwear from stalls that do not tack on VAT, while they use mainly public transportation and go to public schools where tuition is free. They also go to public hospitals that charge minimal fees, while their rentals are usually below the VAT minimum of P8,000 monthly.

“The higher income group tends to buy from high-end establishments such as department stores, grocery stores, supermarkets and malls that are registered for VAT purposes. Thus they are the ones who pay VAT and not those below the poverty line.”

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LATERAL ATTRITION: On the revenue-collection incentive bill ratified last week by Congress, many of us in the audience agreed with Lapus’ observation that the title “lateral attrition” given to it is a misnomer.

While “attrition” presumably refers to the dismissal of revenue and customs personnel who fall short of their assigned targets, it is not clear where “lateral” comes in. The bill is more about performance appraisal, of reward and punishment, Lapus said.

From Pangilinan: “This measure is a motivational tool to inspire collectors to perform better than what is expected of them. It sets aside 10 percent of collections, in excess of their respective targets, as a bonus to be divided among collectors.”

Collection targets would be set by the Development and Budget Coordinating Council. An evaluation board would prescribe the guidelines for the allocation and distribution of the fund. It would set also the criteria and procedures for removing personnel who fall short of target by at least 10 percent.

An official or employee who is dismissed on the basis of the board’s decision may appeal to the Civil Service Commission or the Career Executive Service Board.

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POST-RAMOS SLIDE: President Arroyo has noted that “revenue collection has never gone higher than 20 percent in the past 18 years and has in fact dropped to 14.1 percent of the gross domestic product, the second lowest in Asia.”

Compare this to the record of our neighbors: Indonesia posted 19.1-percent while enjoying a negative deficit of -2.1 percent of GDP. Malaysia has a high revenue effort of 22.7 percent, but also a high deficit of -5.3 percent. Thailand has a revenue effort of 16.6 percent and also enjoys a slight surplus of .6 percent.

Revenues from tax and non-tax sources such as the sale of government assets had risen from 1986 to 1997 (Aquino to Ramos administrations). After President Ramos bowed out, the trend has been downward.

Our highest non-tax collection was in 1994, when almost P30 billion was realized from privatization. To window-dress their yearend financial reports, some government corporations sometimes sell valuable assets and add the proceeds to revenues.

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ENTRENCHED CROOKS: Pangilinan said the country’s fiscal deficit is “principally a revenue collection problem.”

“The solution seems easy, which is to increase the tax-to-GNP ratio to its 1997 level of 17 percent,” he said. “However, overall tax effort fell to 13.9 percent in 2000, and further down to 12.3 percent in 2002.”

He said that about two-thirds of the contraction is traced to the reduction in the BIR tax effort while the remainder is due to the shrunken collections of Customs.

The BIR’s collection for 2004 was below target by P6 billion. Compounding the recurring shortfall, the government loses around P60 billion yearly from smuggling, much of it in connivance with customs men.

Cracking the whip on laggard revenue officers has been a tricky endeavor. When a new BIR or Customs chief goes after those known to be diverting (“stealing” is actually the correct term) collections, the targeted personnel usually hit back and sabotage collection reforms.

Let us see if the so-called “lateral attrition” law can solve that awesome management problem.

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(First published in the Philippine STAR of January 23, 2005)

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