World Bank, bad bank: Gas tax hike proposal to hurt the poor
World Bank logo
The World Bank, in its latest quarterly report on the Philippines, recently proposed that government increase the current excise tax of P4.35 per liter imposed on gasoline products to ensure a quality implementation of Arroyo’s fiscal stimulus plan and address a ballooning budget gap.
According to the multilateral lending institution, its proposal would “improve the progressivity of the tax system as petroleum products are disproportionately consumed by the richer citizens”. In other words, it is acceptable to hike current taxes imposed on gasoline products because the poor will not be hurt.
The World Bank, a global institution controlled by the US and other rich countries, has become increasingly discredited and notorious through the years. For a brief discussion on how it works to intensify global poverty, as told by a former World Bank “insider” – its former Chief Economist Joseph Stiglitz – watch the short video below.
With just a little over two weeks before Mrs. Gloria Arroyo deliver her supposedly farewell State of the Nation Address (SONA), I expected Malacañang to issue an outright rejection of the World Bank proposal. Severely wanting in favorable public opinion and amid persistent allegations of overpriced petroleum products, a categorical “no” from government would have been at least a positive public relations move.
But Finance secretary Margarito Teves, while acknowledging that the World Bank proposal is untimely, said that his department is seriously studying the suggestion and implied that if the World Bank can convince them, they might increase the gasoline excise tax, albeit in a proper time. Maybe after SONA?
There are two points I wish to raise here. One, petroleum products in the country are already artificially and unjustly high due to onerous taxes such as the 12% value added tax and overpricing especially by the Big Three (Petron, Shell, and Chevron) oil cartel. Further increasing gasoline prices through a higher excise tax will further aggravate the injustice and abuse that consumers already suffer.
Two, it is not true that the poor will not be hurt. It has been the recurring argument of Malacañang in its efforts to justify the continued imposition of the 12% VAT (which incidentally, Arroyo worked hard to increase from 10% to the current 12% starting in November 2005). But studies we made at Bayan point to the contrary. For instance, in the case of gasoline products, private car owners are not the only ones who will bear the impact of an excise tax hike. Tricycle drivers and small fishers using motorized bancas who also use gasoline products for their livelihood will be hurt more.
These people barely earn enough to meet the daily needs of their families and every centavo that will be added to their expenses will certainly make their daily existence much harder. At present, almost 600,000 tricycle drivers nationwide directly pay government P9.42 per liter in taxes on unleaded gasoline, representing the 12% VAT and the current excise tax of P4.35 per liter. Such taxes are already burdensome for them as they consume an average of 4 liters a day and thus pay government almost P38 daily in taxes.
Similarly, some 700,000 small fishers using motorized bancas directly pay government P9.10 per liter in taxes on regular gasoline, representing the VAT and excise tax. Per fishing trip, a fisher consumes as much as 10 liters and thus pay government almost P91 daily in taxes.
The World Bank, together with its twin the International Monetary Fund (IMF), has significantly shaped the country’s fiscal policies over the decades. It has strongly supported and pushed for more and higher taxes including the VAT to ensure that government would be able to service its debt obligations. At the same time, the World Bank has firmly opposed policy reforms to control the prices of basic goods and services such as the repeal of the Oil Deregulation Law. It has pushed for lower government spending on social services and promoted the privatization and commercialization of such services.
The people must oppose this latest policy dictate (cloaked as “proposal”) of the World Bank. The burden of addressing the budget gap and raising tax revenues should not fall on the shoulders of the poor. The 12% VAT on oil products must be scrapped and additional revenues should be generated through efficient tax collection, curbing corruption and smuggling, arresting the biggest tax evaders which are the corporations, and re-imposing the eliminated or reduced tariffs on imported goods.
SONA 2009 notes: 3.8 M more poor Filipinos, Gloria richer by P78 M (& they’re even understated)
On her 9th State of the Nation Address (SONA), Mrs. Gloria Macapagal-Arroyo would surely brag again how her administration has successfully steered the economy amid the raging global financial and economic crunch. The best argument that will dispel assertions by Arroyo of a strong and resilient economy is the reality on the ground, the grinding poverty that confronts an increasing number of Filipinos on a daily basis. Such poverty has been constantly present and ever worsening even during the decades-high GDP growth the country posted before the successive collapse of the biggest Wall Street firms and the largest TNCs in the world. Under Arroyo’s almost nine-year old term, the economic hardships facing the people have become even more pronounced because of wrong economic policies and aggravated by the global crisis.
Data cited in the table below were culled from official monitoring and reports of government agencies and it would be interesting to see how Arroyo would explain them (or distort them) to give a semblance of credibility to government’s version of the state of the nation under her illegitimate and corrupt leadership. Deregulation and privatization policies aggressively implemented by Arroyo combined with the continued operation of private cartels (both local and foreign), the continued imposition of and increases in onerous taxes such as the value added tax (VAT) have pushed prices up and the overall cost of living. Consequently, poverty continued to worsen as wages remained depressed while an increasing number of workers become jobless and underemployed.
Amid the people’s worsening poverty, which according to official poverty figures worsened by 3.8 million Filipinos between 2003 and 2006 (latest available data), Gloria Arroyo has amassed even greater wealth. (Note that such poverty figures are hugely understated considering the ridiculously low standards used by government to measure poverty.) The last row in the table below shows the declared net worth of Arroyo when she first assumed the presidency in 2001 and her latest declaration in 2008. During the said period, her declared wealth increased by P77.79 million, or almost 115 percent. Note that the said figures are the officially declared personal wealth of Arroyo and exclude all the ill-gotten wealth she and husband Mike Arroyo have accumulated through the years in Malacañang.
| Indicator |
Start of Arroyo’s term as president (Jan 2001, unless otherwise indicated) |
Present |
| Retail price of LPG per 11-kg tank |
P192 |
P440 (June 2009) |
| Pump price of diesel per liter |
P12.62 |
P33.29 (June 2009) |
| Retail price regular-milled rice per kilo |
P17.51 |
P30 (July 2009) |
| Effective rates of Meralco per kilowatt-hour |
P5.13 |
P8.81 (May 2009) |
| Basic rates of water services in NCR per cubic meter |
Manila Water – P2.95 Maynilad – P6.58 |
Manila Water – P19.64 Maynilad – P23.05 (4th quarter 2008) |
| Minimum wage in NCR including COLA |
P213 – 250 |
P345 – 382 |
| Estimated cost of living in NCR for a family of five |
P509 |
P917 (Sep 2008) |
| No. of Filipinos officially considered as poor |
23.8 million (2003) |
27.6 million (2006) |
| No. of workers officially considered as jobless & underemployed |
8.34 million |
15.6 million (Apr 2009) |
| No. exported migrant workers |
867,599 (2001) |
1,376,823 (2008) |
| DECLARED NET WORTH OF GLORIA ARROYO |
P66.75 million |
P144.54 million (2008) |
Data sources:
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End Gloria’s Rule! Join the June 30 Protest Against Cha-cha
Poster from www.bayan.ph
Oil notes: The point is there is overpricing
Based on our latest estimates (released last week) at Bayan (Bagong Alyansang Makabayan or New Patriotic Alliance), oil firms collect about P167.03 million in extra profits daily from consumers due to continued overpricing.
The Big Three oil firms accumulate an estimated P138.14 million every day from overpriced petroleum products. Petron Corporation accounted for P64.64 million daily of the said amount; followed by Pilipinas Shell, P49.94 million; and Chevron Philippines, P23.55 million. A distant fourth is Total Philippines, which like the Big Three is also a local unit of a giant foreign oil firm, with P7.52 million a day. The rest of the oil players combined for P21.38 million.
As of mid-June 2009, oil products in the country are still overpriced by an average of around P4.31 a liter. This amount is lower than the much publicized P8 per liter overpricing as computed by Secretary Ralph Recto of the National Economic and Development Authority (NEDA).
To be exact, NEDA’s estimates peg the overpricing of gasoline at P5.27 to P7.89 per liter (using four different methodologies). There are a number of possible reasons for difference in overpricing estimates of Bayan and NEDA. One is that Recto’s estimates looked at gasoline products only, while our estimates computed the weighted average retail price of ALL petroleum products including gasoline products, kerosene, diesel, and liquefied petroleum gas (LPG).
Nonetheless, what must be emphasized is not the differences in overpricing estimates but that Department of Energy (DOE) Secretary Angelo Reyes should not simply dismiss the overpricing issue because independent studies such as Bayan’s and think tank IBON Foundation have alleged that oil firms are overpricing long before the NEDA chief came out with his own computation.
The point is there is overpricing. And the issue is what are the policy makers and the executive doing about it?
We must recall as well that Mrs. Gloria Macapagal-Arroyo herself has once pointed out that oil firms in the country are “not reflecting the price of crude oil in the global market”. In November last year, Mrs. Arroyo “urged” oil companies to bring down prices to July 2007 levels to mirror the drastic decline in world crude oil prices then. But such appeal was apparently useless because government has no power to require the oil companies to implement fair prices and adjustments in a deregulated environment.
Persistent allegations of overpricing, or that oil firms are “not reflecting the price of crude oil in the global market”, from various quarters should be enough reason to compel lawmakers to repeal Republic Act (RA) 8479 or the Oil Deregulation Law. An entirely new set of measures must be put in place to regulate adjustments in oil prices and protect consumers from unreasonable oil price hikes.
We computed the “ideal” adjustment in prices using the monthly averages of Dubai crude and the foreign exchange rate from January to June 1-16. The results were then compared to actual adjustments per month (including June 1-16) in pump prices to arrive at its overpricing estimates. To calculate the projected profiteering, we used the actual sales in petroleum products last year, which was pegged at 277 thousand barrels per calendar day (MBCD), and actual market share of each oil company in the first half of 2008.
EU and DFA deceiving the public on European lobby for Cha-cha
The Head of the European Commission (EC) in the Philippines, Mr. Alistair Macdonald, and the Department of Foreign Affairs (DFA) are deceiving the public by claiming that there is no “request” from the European Union (EU) for the Philippine government to modify the 1987 Constitution, specifically to lift the constitutional ban on 100% foreign ownership of land and foreign practice of certain professions in the country.
Such document exists and is actually available online. Click this link and browse the page and look for the link “Philippines” to access the document in PDF format.
This document, which the EU has attempted but failed to keep secret, forms part of the negotiation process for the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO). The objective is to achieve further economic liberalization through a “request and offer process”, i.e. a country will submit a list of sectors it wants liberalized, identify the legal barriers to foreign investment, and request that such barriers be eliminated. The party to which the request is made will then have to make an offer (which sectors the country is willing to eliminate the barriers identified by the EU). The EU made a request to a total of 109 WTO members, including the Philippines.
Reading this document, one would not find the phrase or term “Cha-cha” or an explicit request to modify the Constitution. Instead, the document simply enumerates the identified liberalization barriers and then proposes that such barriers be eliminated. For instance, on page 3 of this document, we will find these entries:
- Participation of foreign investors is limited for certain expressly reserved activities reserved by law to Philippine citizens (MA). EC request: Eliminate this requirement of citizenship…
- Acquisitions of land (MA) require 60% local capital. Foreign investors may lease only private owned land. EC request: eliminate
Limits on foreign investors on certain economic activities and land ownership are implemented because the 1987 Constitution mandates the government to do so, obviously to protect the national interest. By requesting that these prohibitions be “eliminated”, the EU is in effect lobbying for Cha-cha to accommodate their “requests” under the GATS.
External pressure from the rich countries to implement Cha-cha for more economic liberalization has already been raised in the past. In fact, it is the Americans, and not the Europeans, who are more vocal and explicit in their demand for Cha-cha to allow unbridled foreign investments in the Philippines. While the EU veils its Cha-cha lobby under the negotiation process of the WTO-GATS, US-based corporations bluntly state in their official papers the need for Cha-cha.
The American Chamber of Commerce of the Philippines Inc. (AmCham), for instance, candidly said in its advocacy paper “The roadmap to more foreign investment” that when the 1987 Constitution is amended, restrictions on foreign investment and land ownership should be removed. In its 2006 Investment Climate Improvement Project (ICIP) advocacy plan, AmCham vows to seek “removal from the Constitution of all restrictions on foreign investment and professions” to “further liberalize the foreign investment regime to bring needed capital, skills, and technology into the country.”
AmCham’s ICIP, which aims to initiate investment climate reforms in the Philippines, is being funded with an undisclosed amount by the US government.
Meanwhile, the office of the US Trade Representative (USTR), an agency of the US government in charge of directly negotiating trade agreements with foreign governments , as well as resolve disputes, and participate in global trade policy organizations, has identified several provisions of the 1987 Constitution that it considered as “trade barriers.”
These papers are all publicly available, just Google them.
Over and above the narrow, self-serving political agenda of the Arroyo administration, there has always been intense and persistent pressure from the rich and powerful countries to implement Cha-cha and liberalize the economy. While the Philippine economy has already achieved a relatively advanced level of liberalization, such opening is still not enough to meet the insatiable need of powerful countries like the US for markets and profit-making opportunities. And as Arroyo herself has declared, the next phase of liberalization in the Philippines will be in the form of Cha-cha. Arroyo and her clique have been riding on this imperialist agenda to implement their own political agenda to stay in power.
Thus, if Cha-cha is implemented, we will end up with the illegitimate Arroyo government and at the same time surrender to the US and EU whatever is left of our lands, our jobs, our industries and our economic sovereignty.
The people must defeat this evil scheme.
arnoldpadilla
