The tourism slogan is not the problem

The government is always saying that there is something wrong with our tourism industry. After all, why is it that Thailand and Malaysia could attract 14 million tourists/year, while we attract only 3 million? Good question. But I don’t think that the answer lies with our tourism slogan. Or that the country needs to “re-brand” the country’s tourism campaign. I think the problem (problems, actually) behind the lack of tourists is not in the way we advertise the country. We have problems enough, as it is.

Problems
In the first place, I would say that the security image of the country is quite negative. And, this is mostly due to the Muslim insurgency and the image of lawlessness in Mindanao. Foreigners are not that good in geography, and they can’t comprehend that only the Southwestern part of Mindanao has violent incidents, and the rest of the country is generally peaceful.  News of the Maguindanao massacre by the Ampatuans, and of rebel activities in Mindanao, help to paint a picture of insecurity. And the kidnapping of foreigners by Abu Sayyaf in Palawan didn’t help either.

Our geography is another negative factor for tourism.  Our country is an archipelago, which means that transfers from one island to another would have to be by boat or plane – and this means additional expenses and travel time for the tourists. By comparison, Thailand and Malaysia are composed mostly of contiguous land mass (most tourists in Malaysia stick to peninsular Malaysia). And to make things worse, the Philippines has terrible weather during July and August, the peak months for travel for Europeans and Americans. The rainy season for Malaysia and Thailand starts later, around October. It’s a pity that Mindanao, which has good weather in July/August, has a reputation for violence.

And of course, there is the thing about the country’s  airlines not being accredited by the US and the European Union (actually, they are on a blacklist). This means that travellers from these places could not get travel insurance if they fly on our airlines; and this is quite a big deterrent for potential tourists. After all, they could always just go to Indonesia, Thailand or Malaysia, whose airlines are accredited.

So, based on the above factors, I think that the Philippines should realistically expect to be able to generate less than 14 million tourists. But, this is not the say that we should simply accept having only 3 million tourists – I think it could be possible to host a couple of million more tourists per year, if we do things right.

Treat the Tourists Special
Tourists, especially if they come from Europe, have come from quite far away. They have spent a significant amount of money to come over. We need to lay out the welcome mat for them. It would not do for them to be swindled on their first day in Manila, or have to contend with sub-standard rooms and facilities.  We should ensure that they get the best possible treatment.

Tourist Police and Tourist Courts. We should form a special section of the police force to work in tourist areas, and to deal with crimes towards tourists. These police should be able to crack down hard on criminals that victimize tourists. And special courts should be set up to handle crimes against tourists; meaning, for one thing, very speedy handling of cases (since the tourist is in the Philippines for a short time).  The punishment should be extra harsh, and speedy.

Special Handling of Complaints and Inconveniences. In cases where the tourist suffers from unexpected inconvenience, authorities should step in to facilitate things. For example, if they get sick with something like dengue; the government should take over their medical expenses. Or, if they have problems with their accomodations, the government should be able to help resolve the problem. I think the government should set up something like a Tourism Ombudsman Office in the various tourist areas to take care of complaints and inconveniences. And they should really be able to work fast – none of the usual bureaucratic slow handling of cases.

Maximize Balikbayans, Social Media
Balikbayans make up a significant portion of the tourists in the country.  Foreigners accompanying balikbayans also get the balikbayan stamp on their passport upon entry.  And I think we can do even more so that balikbayans generate even more tourists.

Bring a Friend Campaign. I think there was a campaign before to that effect. Anyway, I think they should revive it. Overseas Filipinos are the country’s best advertisement. They could encourage their friends to come to the Philippines with them. I think it should be possible to offer discounts or special deals to foreigners who come to the country together with a balikbayan.

Utilize Social Media. The Department of Tourism should promote the Philippines through social media.  Posts in facebook, or blogs, show our friends abroad how beautiful the country is. And, since they are personal experiences, they are quite credible. I think what the DOT can do is to have contests/awards for the blog that best promotes tourism. And make the award category by destination. Thus, we would have the best tourist blog about Boracay, Bohol, Cebu, Camiguin, Metro Manila , etc. This could generate attention among the bloggers, and this kind of thing would also get spread through facebook etc.. And, for the budget conscious DOT, it is relatively cheap.

Building the country’s tourism industry is not a matter of having flashing slogans; rather, it takes hard work over a long period to build up the image of the country as a tourist destination. It could not be done overnight.

Shark Fin Soup?

Shark Fin Soup – this is a common dish in Chinese restaurants, all over the world. When I was small, I didn’t really think too much of it. I thought that it was something like ox’s tongue, or pig’s stomach, where the whole animal was eaten, and this particular part was a specialty dish. Little did I know that this was far from being the case; and that the fin of the shark was the only part of the shark that is eaten, and that the rest of the shark got dumped in the ocean.

Those who harvest shark fins do so quite literally. They set up “long lines” at the sea, with bait and hooks, and then see what will bite. Often, they get sea turtles (another endangered species) or other kinds of fish. But they mainly get sharks. Then, the fisherman harvests the long line, discarding the turtles or other things they find in the line; when they get to a shark, they simply slice away the fins and dump the rest of the shark overboard. Thus, 95% of the shark is discarded, and only the 5% is kept for sale to the makers of shark fin soup.

This, in itself, is a terrible waste of good animal meat. It is similar to what poachers do to rhinos and elephants. The poachers only want the rhinos’ horn or the elephant’s tusk (for ivory). So, they shoot the rhino or elephant, take what they want, and leave the rest of the animal to rot. And these animals are endangered species, so these poachers are contributing to their eventual extinction. Terrible!

But the story does not end there. The sharks are mainly alive when they are taken in by the long line fishermen. So, when the shark finners take out their fins, they dump the still-alive sharks overboard, where they die a slow death.

While this has been going on for as long as the Chinese have been serving Shark Fin Soup, the recent economic boom in China has meant that there is a very big increase in the demand for shark fin soup. And this means that literally millions of sharks are killed yearly to satisfy this demand.

Jaws?
Sharks have a largely undeserved reputation for attacking humans. Out of the 360 species of sharks, only 4 species are involved in fatal unprovoked attacks on humans: the great white, tiger, bull and oceanic whitetip sharks. And even for these species, they rarely attack humans. Humans are simply not on the menu for sharks; we are too big to eat (animals are not wasteful, unlike humans), and we often have unnatural things like scuba gear etc which the shark senses as unappetizing. Sharks are not attracted to human blood; but they respond immediately to fish blood. Sharks may bite humans as a way of testing if we are edible; and this is usually when the human is acting like a fish (splashing in the water, or wearing something shiny).

To put things in perspective: In the United States, 3300 people drown each year, and 41 people die from being hit by lightning, and only 1 dies from a shark attack.  There are far fewer deaths from sharks than from lions and tigers, or even from hippos – but these other species are protected.

Apex Predators
Before people came around, sharks had been in the oceans for millions of years. They are the ocean’s “apex predators”, the animals at the top of the food chain. Now, it is humans who are above them in the food chain, and we are hunting them to the point where many shark species are on the brink of extinction.

Apex predators are very important to an ecosystem. If the apex predator is taken away from an ecosystem, the animals that they hunt will suffer from a population explosion, and this will have a detrimental effect on the overall environment. We have seen, for example, that taking away the lions or bears from an ecosystem results in the overgrazing of the land, and a negative chain reaction goes down the whole ecosystem.

There Should Be a Law
Actually, there is a proposed law on the killing of sharks [ GMA seeks ban on sale of shark fin soup ] House Bill 174, filed by former president Gloria Macapagal Arroyo, seeks to protect sharks and stingrays by prohibiting the killing, destroying, selling, purchasing, transporting and exporting of these endangered species. If this bill is passed, Sharks Fin Soup will be a thing of the past, at least in the Philippines.

I think it is important for the Philippines to pass such a law. The country benefits from eco-tourism, and sharks are an integral part of the marine ecology – without them, our corals and seas’ ecological balance will suffer, and we stand to lose potential eco-tourism income.  The whalesharks of Donsol, the Butanding, are also sharks, and they are a big source of tourism money.

Sharks, of course, are valuable beyond their eco-tourism potential. We should protect the world’s many species of animals simply because we need to be good stewards of nature, and we should not crowd out other species who share this world with us – especially not for a simple bowl of soup.

Abolish Documentary Stamp Tax

The Philippine government collects a Documentary Stamp Tax on a wide range of documents, from sales receipts to checks, to transfer of stocks, land and other assets, etc. While the percentage of the tax is small – usually about 1% of the value of the transaction, it is in fact a heavy burden in terms of running a business.

The Documentary Stamp Tax includes taxes on things like:

• certificates of indebtedness – 0.75%
• issuance of shares of stocks – 1%
• sales of stocks or obligations – 0.75%
• bank checks and drafts – Php 1,50 per check/draft
• foreign bills of exchange or letters of credit – 0.15%
• life insurance policies – 0.25%
• property insurance premiums – 12.5%
• pre-need plans – 0.10%
• warehouse receipts – Php 15/receipt
• jai alai, lotto, or lottery tickets – 10%
• bills of lading – Php 15/bill of lading
• sale of land – 1.5%

The Documentary Stamp Tax is also collected in other (primarily English-speaking) countries but they are mostly limited to the transfer of land and stocks.  It seems that it is only the Philippines which has such a wide range of application of the Documentary Stamp Tax.  Also, the countries which have a Documentary Stamp Tax are on the way to phasing it out. It is, in reality, an archaic tax that was invented in the days when business was done in a more leisurely pace. When the time taken to pay a tax on documents did not matter much in terms of the speed in which a transaction is made.

Impediment to Business
Much more than being a burden in financial terms, the documentary stamp tax is a burden in the sense that it slows down the way Filipinos do business. If you have to pay a tax for every check you issue and every receipt you make, for every stock you or sell, etc., you loose precious time in each transaction, and this would mean a lot eventually in terms of the profitability of business.  In fact, you even stand to lose business. Some Philippine stocks could be bought or sold in other stock exchanges, and insurance could be bought in other countries. In these cases, the concerned businesses will simply do these transactions elsewhere.  But we also have to take into account the sheer amount of time and effort it takes to administer such a small tax.

The documentary stamp tax is an additional step that needs to be taken when registering a business, and is also means that the business needs to pay that tax a number of times during the year. This slows down the business process, and these are factors that contributed to the Philippines ranking only Nr 144  (out of 183 countries, which I think is quite low) in the survey on the “Ease of Doing Business in 2010”.  Philippine businesses are shackled by the fact that they have to devote time and money to paying the Documentary Stamp Tax, and this lessens their efficiency, at a time when competition has grown more global.  Take note that we are  the only country that charges Documentary Stamp Tax for all business receipts, for every Bill of Lading, and for every check written.  No wonder that we are not that competitive in the world – the additional paperwork needed alone increases the time needed for business transactions.

In addition to the paperwork, the Documentary Stamp Tax makes payments by check or bank transfer more expensive than cash payments (from the customer’s point of view). This skews the payment pattern towards cash payments. In developed economies, they try to make it cheaper and more convenient to avoid paying cash, and thus bank charges and taxes for checks and bank transfers are minimal or nonexistent.

The documentary stamp tax also lengthens the time needed to process the sale and transfer of land; and this means that that market is also not operating as efficiently as it should.

Abolish the Tax
I think that the government should simply abolish the tax. If they worry about the loss of tax revenue, I think it will be entirely possible to simply increase related taxes like the corporate tax or property taxes by something like 1%. You will then end up with having less number of taxes, but the same amount of income.  The Documentary Stamp Tax itself does not raise a lot of money for the government – perhaps less than Php 3 billion (something like Euro 60 million) a year, but it takes up a lot of time to administer, both by businesses and by the tax authorities.

I think that it is entirely possible that a large part of Documentary Stamp Tax due today is simply not paid by companies. And this is rather difficult for the government to collect, especially in the case of receipts or checks. So, integrating the Documentary Stamp Tax with the corporate tax will not only simplify the administration, it may also raise tax collections.

The first balikbayan

Ferdinand Magellan (Fernao Magelhaes) is claimed to be the first person to circumnavigate the world. However,  given the fact that he died at Mactan, he wasn’t able to complete a full circle of the world. Thus, there are those who say that Sebastian Elcano, who commanded the last of Magellan’s ships which returned to Spain, as the man who deserves this honor.

But there was someone else who really did circumnavigate the world first. And this was “Enrique” otherwise known as Trapobana, Magellan’s slave, who came from the Philippines, and went around the world and back to the Philippines. He was,  in fact, the first person who did “circumnavigate” the world.

Circumnavigate
We should first agree on what “circumnavigate” means. Because, if it means “going around the world, and returning to the same point”, then it would really mean that Trapobana was the first one to do so.  But if it means “going around the world, and then returning to the same degree lattitude”, I guess you will have to let him share the honor with Magellan, who had been to the Moluccas, which is about the same degree lattitude as Cebu.

I would prefer the first definition, making Trapobana the first to circumnavigate the world. But the thing is, we still need to “prove” that Trapobana did originate in Cebu. There are those who claim that he simply spoke Malay, and that this was a “trade language” which was understood throughout the whole of what is now Malaysia, Indonesia, and the Philippines. But, if this was the case, why was he unable to communicate with the people in Homonhon, who spoke Waray? If Malay was a common trade language, he should have been able to speak Malay to the inhabitants of Homonhon, or at least to the local ruler. But why was he only able to communicate in Limasawa, and eventually in Cebu? It was not the king whom he spoke to through interpreters, but to the local people, who met them with small boats. Thus, we could conclude that he spoke the same language was the Cebuanos, and that he was also, in fact a Cebuano.

There are also those who say that he Cebu was a mighty trading “city”, and that the king had interpreters who spoke Malay.  But, this was not the case in Limasawa, which was by all accounts, a small place – the local authorities at Limasawa didn’t have interpreters, unlike those at Cebu (if they did at that).

Cebuano Slave, Bought at Malacca
Magellan is said to have bought him while he was in Malacca. Some other writers say that he was part of a Filipino trading community based in Malacca. But this is quite improbable – if he was part of a trading community, then why was he a slave? Besides, the trading community based in Malacca could have been mainly Tausug, or Tagalog, and not Cebuano. I don’t think it would be common to simply kidnap a member of a trading community, and then sell them, while in the same city, to a foreigner as a slave. Much more likely, he was kidnapped somewhere else, and then brought to Malacca to be sold.

Cebuano is spoken in Cebu, Bohol, Siquijor, parts of Negros, Leyte and Mindanao.  I think that Trapobana came from one of these places. He would have been captured by marauding Tausug slavers (who, even in Spanish times would raid these same areas) or slavers from even further away, and brought to the slave market at Malacca.

If Trapobana was not specifically from Cebu, then his world journey (or circumnavigation) would not have ended with him being left in Cebu. However, it would have been an easy matter for him to return to Leyte or Negros, once in Cebu, and this could have arrived home before the Spaniards were able to return all the way to Spain.

Thus, we can say that Trapobana, a Cebuano, was not only the first person to circumnavigate the world, but also the very first balikbayan.

Abolish the Capital Gains Tax

The tax system in the Philippines is quite complicated. And the capital gains tax is one of the most complicated part of it. While people are required to pay a capital gains tax,  the procedure for paying such a tax is quite complicated, and they will be terribly complicated for anyone who is active in the market for stocks, bonds and other financial instruments.

I suggest that we simplify this part of the tax system, while retaining the level of tax income of the government. And this is simple: abolish the capital gains tax. In its place, the government could simply impose a wealth tax. This will simplify the administration of the tax, and encourage investments in Philippine financial instruments.  And this will also close a lot of practical loopholes in the implementation of the law.
[The Netherland’s government implemented such a tax on wealth in 2001, and it has simplified the collection of taxes.]

Simple
A capital gains tax involves the taxpayer providing documents proving the initial price of land or a financial product, and then also documentation on the price this piece of land or financial product was sold.  And, if these products were sold at a loss, this would be able to offset tax due for sales that resulted in a profit.

This is not only tedious, but it would be difficult of the tax authorities to check. And, when it comes to land, the documentation to prove the price a land was bought is extra difficult because a lot of land is simply inherited.

On the other hand, a wealth tax is simple.  The basis would be something like a statement of assets and liabilities. And then, a tax (for example, at a rate of 1%) of wealth (which is the net of assets minus liabilities) would be imposed. Land will be valued at its declared value at the end of the year; but the owner should be careful not to under-declare the value, because thie declared value would be the basis for government buying this piece of property, and also serve as the basis for banks counting it as collateral for loans.

Specifics
Let us now describe our proposal in more detail:

• the tax on capital gains is abolished.
• the wealth tax will be 1% of declared wealth; the first Php 1 million of wealth is exempted from this tax. The tax includes all wealth: land and other real estate; bank deposits, stocks. Deducted from the taxable wealth would be loans owed.
• the value of land and other real estate will be its zonal value
• the value of shares of stock will be their market value at the end of the year.
• the tax on dividends and interest will be withheld at the rate of 10% at the source (i.e. by the company or bank); those who file for wealth tax could deduct the tax collected from the amount due in wealth tax. Thus, foreigners who receive interest income or dividends pay the tax; residents end up not paying tax.

People who have previously paid the wealth tax, but have not filed their tax for a given year will be assessed by the BIR for the wealth tax at 110% of their previous wealth (thus, assuming that their wealth increased by 10%).

The declaration for the wealth tax will be submitted at the same time as the income tax.

Increased Tax Compliance
One thing about wealth, is that it is relatively constant. So, a given taxpayer would be paying generally the same amount every year, increasing gradually every year.  And, since the wealth tax would replace the tax on dividends and on interest income, there will be no need for the BIR to monitor these, since they will be automatically collected. It will be the taxpayer who will declare their interest and dividends, since they want to use the tax withheld to offset the tax on their other assets.

The government would not even need to find out exactly how much money people have in bank accounts.  Tax will be withheld from them anyway; and  if the depositor does not declare their bank balance, then they will not be able to get part of the withheld tax back – it’s his problem.

The advantage of a wealth tax is that all wealth of citizens will be taxable. Thus, theoretically, also the wealth in the form of foreign bank deposits. And, Swiss bankers (for example) are amenable to withholding tax from their foreign depositors, on the condition that their identities are not revealed. This means that the Philippine authorities can collect taxes even from “secret” Swiss bank accounts (even without knowing whose accounts these are).

If, for any reason, a person’s wealth is less than the previous year’s, then they should prove this by showing documentation.