Implementing a Proportional Representation System

In a previous blog (See ‘Proportionally Represented Parliament’), I dealt with the question of why a proportional representation system is better than the present Philippine system. The advantages include: every vote counts, parties represent programs, simpler and cheaper campaign and elections, no pork barrel. In effect, this means a lot less corruption and more citizen participation.

Now, let us get into more specific things about how a proportional representation system can be set up in the Philippines, and what problems to look out for.

Voting Threshold
One real possible problem would be that proportional representation may end up with so many parties in parliament. If parliament were to have 200 members, they could theoretically represent 200 different parties. Having a lot of parties (even if not really 200) would make forming a governing coalition difficult, and keeping it together would be quite tedious. This is the problem, for example, in India, where they have many parties splintered on regional and caste lines.

In order to avoid that problem, various countries have an Election Threshold – which is a minimum percentage of the vote needed before a party can be represented. In effect, this puts a limit on how small a party can be but still be in parliament.

If the election threshold is set at 5% in a 200-member parliament, the minimum size of a party parliamentary group would be 10 MPs. So, a 5% threshold will result, at most to 20 parties in parliament (i.e. 10 each). In practice, however, the number of parties for a 5% threshold will probably be 5 to 7, with perhaps 3 big ones. The German parliament has a 5% threshold, and it has 5 parties represented.
For the Philippines, I think a 5% threshold is too high. A threshold of 2% will suffice – it would eliminate marginal parties, but allow a wide enough range to be represented.

Personality-Based Parties
While all parties will be required to have a program and a list of candidates to participate in the elections; some parties will not really take their programs seriously. In effect, there would still be party formations built around personalities. This is inevitable, but it is also going to be short-lived. If parties are based on party-lists, there are inevitably going to be politicos who don’t agree with their position on the list, and they may leave. But if they leave and form a new party, the question of who gets top billing recurs. Eventually, these small parties will fail to achieve the election threshold and die out as parties.

One problem for trapos is that, on the average, they will have to get support of twice as many votes to get a proportional representation seat than they did previously for a district seat. To get a district seat, they just had to get a majority (50%+1 of votes); but for a proportional representation seat, they would need to get approximately 100% of all votes of a district (or the equivalent from all over the country). With a threshold of 2%, parties would have to get at least 8 times as many votes as before to even get represented in parliament.
This will be an enormous burden on the capacity of the campaign machinery of trapos.

‘Trapo’ parties will be many during the early days of a proportional representation parliament. But these will splinter and die out with time. By the 3rd or 4th round of elections, the overwhelming majority of parties will be national and program-based.

Absenteeism and Useless Speeches
If an MP is consistently absent, the party has the right to kick that MP out and replace him/her with the next person on the list. Being absent is especially frowned upon because parties vote as blocks, and when one is absent the party in effect loses one vote.

The waste of time due to all kinds of speeches is put at a minimum. During plenary discussions, parties designate issue-spokesperson to present the party stand on an issue or proposed bill. Thus, there will be only one speaker per issue per party. There are no ‘privilege speeches’ by parliamentarians.

Proportionally Represented Parliament

I am not really proposing Charter Change, but if comes down to it, I would propose changing the Philippine system from a US-style winner-take-all district system to a system of proportional representation.

In a proportional representation system, people vote for the party of their choice, and the total seats in parliament are divided based on the percentages of votes for a given party. Thus, if the parliament has 100 members, a party that gets 10% of the votes will get 10 seats.

Why is a Proportional Representation System Better?
A proportional representation system will result in simpler, cheaper government, and the development of real parties. This system could be implemented so that not only is the national parliament elected this way, but also provincial and city officials. Thus, mayors and governors will be selected by city or provincial councils.

Simpler Elections. People would only have to remember the name of the party of their choice, instead of the names of a lot of candidates. This means that he/she would need to remember at most 3 parties (assuming that he prefers different parties for various levels) – for parliament, province and city. Simple.

Administering such an election is simple; the ballots are simple, and if ballot boxes are separated by level (national, provincial, city), counting is just a matter of piling ballots. It also means that less money would be used in the campaign. There would be no need for sample ballots, and advertisements need to only project a party name. Also, campaign machinery is organized per party, there would be no need for a personal campaign machinery.  And because campaigning is cheap, there is less chance that rich people would control the election.

Programs. Members of Parliament will represent the people who voted for their party. And this means that a party’s program will be more important than individual candidates’ profiles. In Europe, this has led to parties representing various parts of the population, with different policy proposals. Parties who are simply for ‘clean government’ or ‘change’ (and thus, no real program) will be voted out. Parties will stress on the policies in which they stand out.

Every Vote Counts. In a district system, minorities have no voice. If you don’t want either of the two choices for an office, you can’t do anything. You may also decide not to vote if you expect that your candidate has on chance of winning. In a proportional representation system, every vote counts towards the seats that the party will be alloted. In theory, even a single vote could result in a difference of one seat in parliament.

No Pork Barrel. Since Members of Parliament represent parties (and not districts), pork barrel allotments would no longer be necessary or even applicable. Members of Parliament will be more focused on the making of laws, and not on naming a school or bridge, or other specific ‘goodies’ for their districts.

Not District Parliamentary
A UK-style district parliament would not be as good as a proportional representation type of parliament. A UK-style parliament will not make every vote count, there would be more (not less) pork barrel, and the rich can still control the outcome of elections. The UK-style system would only be marginally better than a presidential system.

A proportional system of electing representatives already exists in the Philippines – in the form of the party-list system. The party-list system just needs to be expanded to include all the members of parliament, and it should be opened to all political parties.

Needed: A Wealth Tax

With the increased consciousness about the top ‘1%’ wealthiest, there needs to be a corresponding policy aimed to address the ‘imbalance’.  One aspect of this policy would be a Wealth Tax.  A Wealth Tax is based on the logic that for the wealthy, what counts more is what they have than what they earn.

A Wealth Tax in the Philippines could be levied on all assets (minus liabilities) of persons above 50 million pesos. Assets will be valued at their book value (i.e. the actual price paid for them) and not market value. The wealth tax will be levied on all Philippine residents (defined as persons who have resided in the Philippines for 6 months and a day in the last calendar year) on all their wealth. A Wealth Tax paid to foreign governments for wealth outside the Philippines would be credited towards the Philippine Wealth Tax.

The Wealth Tax will, for those who pay it, replace the Capital Gains Tax, the Tax on Interest and Dividends. All donations to private foundations will still be considered as part of taxable wealth (for a period of five years), unless the donor has no corporate or family relations to the foundation’s board.

Why a Wealth Tax?
A Wealth Tax simplifies tax collection. There would no longer be a need to monitor interest payments or even the present value of assets. Tax loopholes using all kinds of fiscal constructions will be closed. The BIR will simply have a file per person with a list of Assets and their book value.  Wealthy people will be paying roughly the same amount every year.

A Wealth Tax is fairer than an income tax on rich people. Wealthy people don’t necessarily have high incomes, but wealth. It helps to make sure that the wealthy pay a fair portion of their wealth in taxes.

A Wealth Tax stimulates investment. It penalizes just sitting on your money, or having assets that are not productive. Those who make productive investments will be taxed the same as those who don’t; but they will make a lot more money. Those who sit on their assets will find that these diminish in value, literally, every year. Since the Wealth Tax will tax you on the book value of investments; if you make a bad investment and the value of your shares of stocks go down, you will continue paying the wealth tax based on the original investment. Only if you sell the stocks and take the loss, will your Wealth Tax liability decrease.

Prerequisites
Before a Wealth Tax can be implemented in the Philippines, a number of things need to be changed:
Bank Secrecy. In the Philippines, the government is not allowed to look into the bank accounts of citizens and residents. This opens the way for people simply to lie about their wealth. In Europe, the principle is ‘privacy of bank accounts’ which means that people’s bank transactions could not be made public, but that the government could look into them. Before any meaningful Wealth Tax is implemented, it is imperative to change Bank Secrecy to Bank Privacy.

Reform Land Valuation Rules. People regularly register their land, for taxation purposes, at a low value (i.e. at book value, or lower). This makes land ownership a potential haven for people wanting to evade a Wealth Tax. Land assessment values should be adjusted upwards regularly, to keep it in pace with the actual market value of the land.  This could be done by implementing a ‘Zonal Land Valuation System’ that species the minimum value for land in given areas. And government could make a rule that it could buy any piece of land at a maximum of some 20% above assessed value. This would compel rich people to correctly state the value of their land, or risk making a big loss if the government decides to buy it.

Implementing It
A Wealth Tax could initially be set at about 2% of the value of taxable wealth – defined as assets minus liabilities above 50 million pesos.  When it is implemented, the tax on the highest income tax bracket should be lowered from 32% to 25%. Also, if one pays Wealth Tax, a number of taxes will be credited to it e.g. Capital Gains tax, interest tax, tax on dividends.

In subsequent years, the rate for the Wealth Tax could be raised, while the income tax and corporate tax rates lowered to counterbalance the effect. This should stimulate the economy while maintaining the level of tax income.

UK Leaving EU. Really?

On 24 October, the British parliament voted on a resolution calling for a referendum on Britain’s membership in the EU. It lost 111-483.  Nevertheless, it was an embarrassing  blow on PM Cameron’s efforts to participate in the Euro discussions (French president Sarkozy refused his entry to a Eurogroup meeting, he told Cameron not to intervene). As a result of the eurosceptic rebellion, the already low reputation of the UK in the EU went down a couple of notches.

It seems that almost half of the people in Britain favor leaving the EU. For them, the EU is the source of all kinds of regulations that only make their lives more miserable. And with the present crisis in the Eurozone, it seems that the British are just waiting for the rest of the EU to implode. So, better get out now, while they still can save Britain from economic collapse, and from a loss of its identity. Or so they think.

But can the UK really leave the EU? Of course it can. It can opt to leave the EU and just be like Norway, Switzerland and Iceland. These countries choose the areas where they would cooperate with the EU. But, if the question is whether the UK will thrive outside the EU? Then the answer will have to be: most certainly not.

Single Market
For the UK, leaving the EU will mean going out of the Single European Market. The consequences of this will not be immediate, since the UK’s present laws are still in harmony with those of the EU; trade will go on as usual for the time being.

But the EU is constantly revising the rules that govern the internal market. And when they change some rules, and the UK doesn’t, that specific area of trade will be affected. So, the UK will most likely keep its own economic rules in harmony with those of the EU, just to keep trade going as usual. But then, in contrast with the present, the UK will increasingly be following rules which it had not helped to formulate.

Many companies would have to reconsider decisions on having their offices and factories in the UK. After all, they had based these in the UK on the basis of the UK as part of the EU. Car manufacturers from Asia, the US, and even other parts of Europe had located their plants in the UK to benefit from its cheap labor AND its access to the EU market. Many of them will surely phase-out their factories and offices when the UK leaves the EU.

London’s role as a financial center will not necessarily suffer with an EU withdrawal. But, as in trade, the UK government will have to follow all EU regulations. Take for example the proposed Financial Transaction Tax now being discussed in the EU. If it is implemented, the UK will have to impose a similar tax, or it will create a barrier to the free flow of finances.

However, no matter how much the UK tries to harmonize its laws with that of the EU, it will still remain a foreign country to the EU. Government procurement, for example, is often open to all companies within the EU. The really big contracts may be open to bidders from the whole world; but the bulk of the contracts are restricted to EU companies. This means that EU companies will have a lot more contracts than UK companies.

UK, the ‘Great Exception’
If the UK leaves the EU, the EU will not only go on with business-as-usual; it will simplify and accelerate its process of integration. The UK has always been the EU’s great exception, opting out of many important agreements and forcing the others to find creative detours. Thus, the Schengen agreement on free travel of persons does not include the UK. The UK is not part of the Eurozone.

With the UK gone, EU decisions will increasingly be done by ‘qualified majority’ instead of ‘unanimity’. The EU will integrate more, and more intensively, with or without the UK. But if the UK were to leave the EU, the EU will just integrate much faster. For example, adoption of the Euro may be made a requirement for a country to fully participate in the EU. And the free travel of persons may also become standard.

If the UK were to decide that it wanted to return to the EU, after a number of disastrous years; it will be faced with a much different EU than it had left. No longer could the UK keep itself as the ‘great exception’. It would have to accept the Euro AND free travel for persons, as part of its EU accession negotiations.

Another function that the EU has, is that it serves as a useful bogeyman when national politicians want to push necessary but unpopular laws. They could always say that they were forced by ‘Brussels’ to do it. If the UK leaves the EU, its politicians could no longer blame Brussels.

To sum it up: stepping out of the EU will mean that there will be more (not less) EU rules that the UK needs to follow; but that the UK will have no say in formulating these rules. It will mean less access to the EU internal market, with international companies transferring to countries inside the EU. It will mean that British politicians have only themselves to blame for the UK’s problems. So, unless the British wish to damage their economy in the name of national pride, they should not leave the EU.

Don’t Imprison Ex-Presidents

Many people advocate putting former president Gloria Macapagal Arroyo on trial, in the hope of imprisoning her for misdeeds. They say that a president, who holds ultimate power, also has ultimate responsibility and needs to be punished the most if they abuse this power.

They have a point. But, I disagree with their course of action. Imprisoning an ex-president is not a good idea. Imprisoning Erap was a big mistake, and it’s too bad that we haven’t learned our lesson.

Political Reckoning
The biggest reason for not imprisoning ex-presidents is that it gives the impression of it being a political reckoning by the current president. The recent trial and jail sentence of Julia Timoshenko of Ukraine illustrates the point. She was convicted on a flimsy charge of signing an oil deal disadvantageous to the country, and now has to stay 7 years in jail for it. This verdict has damaged Ukraine’s relations both with the West and Russia.

Coup leaders in all kinds of third world countries routinely throw their predecessors in jail. While these civilian ex-presidents may have been quite guilty of corruption; they nevertheless had been singled out for prison, while other corrupt officials remain in office.

In the case of Thailand, Prime Minister Thaksin Shinuatra was deposed by a military coup. And then he was charged with corruption to effectively keep him from returning to the country. As a result, Thailand had troubles with Thaksin supporters (the ‘red shirts’) who alternatively held massive demonstrations and defeated military-backed parties during elections. Now, we have Thaksin’s sister (Yingluck Shinuatra) as the new Prime Minister.

The imprisonment of Joseph Estrada was also, in a way, a political reckoning. The ‘revolutionaries’ (led by Makati Business Club types) of EDSA 2 had to convict him of corruption in order to justify having overthrown him. While  Estrada was certainly quite guilty of corruption;  he had been singled out for conviction, and that was still a political reckoning. Estrada was eventually pardoned by Arroyo, but only after Arroyo had been elected for another presidential term. Whatever we may think of Erap Estrada, enough people felt that he was deposed and imprisoned unjustly, and that he deserved to continue his term as president. In protest, these people voted for Fernando Poe Jr (a close friend of Estrada) for president in 2004, and gave Estrada get the second highest number of votes in the 2010 elections.

Base of Support
Every former president has a base of electoral support. These people will react (sometimes, quite violently) to the imprisonment of ‘their’ president. In the case of Estrada, we saw this in the large mobilizations for ‘EDSA III’ and the electoral support during 2009 elections.

The peaceful transfer of power from one president to the next is not helped by the prospect of the new president imprisoning the old one. Not only may it lead them to stay in power longer (perhaps by extra-constitutional means), the president could also appoint people to key positions (e.g. Ombudsman Guttierez) to prevent this from happening. A president appoints a lot of officials during his/her term, and some have terms that last way into the term of his/her successor. These people could cause trouble for the new president if the previous one is imprisoned.

Dictators
Dictators are an exception to the principle of not imprisoning presidents. By definition, dictators don’t hold fair elections anyway. They usually appoint close family members to head the security services (General Ver was a relative of Marcos). Dictators are notorious for imprisoning or killing a lot of their opponents.

When dictators are overthrown in a revolution, the change is so abrupt, so radical. All the appointees are thrown out together with the dictator. There is no constitutional continuity to preserve, since the dictator had so mangled the constitution that the new government has to draft a new one.

Corrupt presidents are one thing, while cruel dictators – with a lot of blood on their hands – are another. While I advocate NOT imprisoning corrupt ex-presidents; dictators need to be tried in court if possible, in order to fully expose their acts, and so steps could be taken to prevent them happening again. Then they should be thrown in jail, if found guilty.

What to do now?
But if we don’t imprison an ex-president, or his/her family, when they are corrupt, does this mean they have special treatment? Will they go unpunished? Isn’t this impunity?

Not really. In a case of a corrupt ex-president, the best option may still be to subject him/her to a fair trial. If found guilty, he/she should be sentenced to both a prison term and a fine (equivalent to the money stolen). And then, the prison term should be suspended.

This way, the ex-president’s loot is returned to the country, and he/she is barred from returning to office indefinitely. The electoral base will be bothered, even unhappy; but they will accept the court verdict. As for the corrupt relatives, they should be given the maximum prison sentence if found guilty. This is also, indirectly, a punishment for the ex-president.