A Tax on Wealth

The news that Pacquiao is the Philippines’ Number One taxpayer was expected, but it is also rather strange. Previously, it was Kris Aquino who was the No.1 taxpayer; but as a result of better tax collection, a lot of celebrities and businessmen are now paying more than her. But why is Pacquiao No.1? Why not the Filipino billionaires who were recently listed by Forbes Magazine (Forbes recently published a list of the world’s 500 richest people, in which 11 Filipinos were listed) ?
The reason for this is that our tax system taxes income, but not wealth. Pacquiao’s earnings are publicly known (as were those of Kris Aquino, to a lesser degree) and this is readily taxed. Billionaires, on the other hand, own shares of stocks that are worth billions of dollars, but they are only taxed whenever the companies they own declare dividends. These companies often declare minimal dividends, and often even none at all..
Billionaires also have formal positions in the companies they own, which entitles them to have a lot of their expenses declared as company expenses e.g. travel, restaurant meals, company cars, exclusive club memberships, etc. These expenses are not counted toward personal income, and thus would not be taxed.

Incomplete Tax System
The unfair situation of billionaires paying less tax than celebrities, and of government employees paying a bigger proportion of their income than millionaires, needs to be addressed. But first  we need to take a look at the Philippine tax system as a whole.
We have taxes on consumption, in the form of the Value Added Tax (VAT) and various specific taxes. Then, there are taxes on income, in the form of the income tax, capital gains tax,etc. And there is the tax on real property and an estate tax (on inheritance)..
Consumption taxes fall more heavily on the poor people, because they consume most of what they earn. Income taxes fall heavier on the middle classes, especially those who earn fixed salaries e.g. government employees. Property taxes are paid by those who own land. But millionaires (and especially billionaires) mostly own stocks in companies, as well as bonds and other financial instruments.These are taxed only on income earned from them. Estate taxes are low and the rich can easily avoid them.

In order to have a fair tax system – one which is borne evenly by all layers of the population – there needs to be a tax on wealth, and not merely on income gained from wealth. That way, the rich will  bear a more equal share of the tax burden. A wealth tax will make the tax system not only more fair, but also more complete.

Specifics
A wealth tax could be imposed on all of a person’s property – stocks, bonds, bank deposits, other financial instruments, real estate, vehicles and other valuables (e.g. jewelry, art). Most of these would be valued at  the price which they were acquired. Company shares of stock will be assessed at their current book value.
I propose that the first P5 million worth of wealth would be exempted from the tax. From above P5 million to P10 million, the tax would be 0.5%; and above P10 million, 1% per year. This may sound small, but it would mean that Philippine dollar billlionaires would pay hundreds of millions, even billions of pesos a year. Henry Sy, for example, who is worth more than P640 billion, will need to pay P6.4 billion/year. Even Manny Villar (No.11 in Forbes’ list) will pay P720 million yearly in wealth tax.
The reason why the first P5 million should be exempt from wealth tax is to spare many middle income people from it – a person’s house, their car(s), bank accounts and some investments or land could amount to a few million pesos already.

The wealth tax will be imposed on all persons with wealth. Foreign owners of Philippine financial assets will be taxed for the assets that they hold in the Philippines – corporations would pay the tax for their foreign owners. Properties for which real estate tax has been paid, will be exempt from the tax. ( the land tax does not tax buildings, buildings should be counted toward the wealth tax)

A prerequisite for implementing the wealth tax is that the tax authorities would have access to everybody’s bank accounts. There should also be rules to prevent rich people from hiding their wealth in charitable foundations or various fiscal constructs.

In addition to generating tax revenues, the wealth tax will also make it possible to have a complete inventory of property in the country. The ownership of every piece of land, building and financial instrument will be known and recognized. This means that nobody can claim to own anything without having paid a tax for it. The wealth tax will allow authorities to catch dummy constructions or to spot property whose ownership is hidden.

Everyone who owns wealth (e.g. a house or stock investments) will be required to declare it in their wealth tax return, even if they eventually do not need to pay any wealth tax. If they fail to do so, the government will assess their wealth for them.

Why do Filipinos keep on Electing Idiots?

Why do Filipinos keep on electing idiots to public office? This is a question often heard in the country, especially whenever an official does or says something weird. A short, objective, answer to this would be: No, we don’t; most Philippine officials are not idiots. I think that if we would be able to get the IQs of all Philippine officials, at all levels; we would find out that their average IQ is significantly higher than that of the overall population.

The perception that we are being ruled by idiots (and the related perception that we must be idiots for electing them) is quite widespread. This is due to a number of reasons:

First, any political system that selects its leaders (mostly) on heredity (read: political dynasties) or other criteria than on intelligence or performance would naturally result in some officials with below average IQ. In medieval or feudal times, we remember stories of mad kings and other royalty. Nowadays, this happens quite rarely.

Second, everyone (even those with very high IQs) make stupid or inappropriate statements (or do stupid things) from time to time. In the TV series ‘The Big Bang Theory’, the character Sheldon, who is a genius, is continuously making grossly inappropriate statements. This demonstrates that a lot of bright people can act quite ‘stupid’.
These days officials are increasingly living in a ‘glass bowl’ – always with the possibility of surreptitiously taken video clips and witnesses – and news travels quite fast with social media. So, it is but natural that officials slips are noted more these days. The public should learn to live with most of these ‘slips’.

Third, peoples world views differ; and often they view those who hold other views as strange or even stupid. In the debate over the RH bill, many of those who were against it did so from a very traditional Catholic point of view. They all sounded quite archaic and so ’19th century’ to those who were in favor of the bill. In another example, Bayan Muna representatives would be viewed as having ‘looney’ ideas about many issues. I think both groups of people are quite intelligent.

Fourth, many politicians play for an audience. Be it Duterte threatening to kill all smugglers in Davao, or Mar Roxas carrying sacks of rice after a raid; these are all intended to convey a message. Some actors with showbiz backgrounds tend to be even more theatrical – like Revilla who ‘sang’ during his privilege speech.

Fifth, people’s prejudices come to play. There is, for example, an assumption among many that celebrities are brainless and have no place in politics.This is demonstrated by the aversion of many to the plan of Kris Aquino to run for the Senate. Kris is certainly quite intelligent – she is the daughter to one president and sister to another. The questions people should ask should be: ‘what are her political views? will she work full-time as senator?’
It is intellectual snubbery to assume that candidates without academic credentials, or who are showbiz personalities, are dumb or idiots.

Though many politicians are quite intelligent, a lot of them are not performing their functions well. Lito Lapid’s difficulty with debating in English should not be the issue, but rather his absence in most Senate sessions. Pacquiao’s being one of the ‘most absent’congressmen should similarly be made the issue.  Many mayors don’t even live in the municipality they are mayor of. Being a public official should require a full-time commitment to their work, be it as mayor or senator.
This is where the public often falls short: they prefer to vote for a candidate’s promises, but don’t vote them out of office if they don’t perform.

Another issue altogether is the matter of corruption. Some of the most corrupt are also the most intelligent. Marcos is the classic example of this; Arroyo a (relatively minor) recent example. It takes intelligence to be truly corrupt. An unintelligent corrupt official will readily be caught;  the bright ones are able to steal for years and years.

The challenge for the public is to elect officials who are not only intelligent, but also diligent and honest. This is tough. But I believe we can do this, eventually.

Same-Sex Marriage and the Philippines

President Obama recently declared his support for same-sex marriage. This will undoubtably affect the results of the US elections – but exactly how, is anyone’s guess. The same-sex marriage issue has changed a lot in the US since 2004, when George Bush succesfully painted John Kerry as pro-same-sex marriage, and won the election.

One effect of Obama’s declaration has hit the Romney campaign. Bill White, a prominent gay supporter of Romney, withdrew his support and demanded to get his contribution back. He said that Romeny had “chosen to be in the wrong side of history”. He is now supporting Obama.

Prime Minister Cameron of the UK declared that his support of same-sex marriage is not despite his being a conservative, but because he is a conservative. Cameron makes an important point. Same-sex marriage is in reality a conservative demand. In an era when many people have divorces, and others decide to forego getting married in the first place; gays want to get married – and commit themselves to abide by societal conventions in the process.

Philippine Case
While same-sex marriage is not yet an immediate concern for the Philippines, it raises points which are already relevant. Among these would be the question of what to do with gays who do form lasting relationships. Even from a purely legal point of view, it would be a lot more convenient if gay couples could get into something like a ‘registered partnership’ if only for matters like inheritance, medical decisions etc.

At the same time, there should be some changes in the legal status of some heterosexual relationships. Under the principle that “consenting adults who love each other should be allowed to marry”, the country would need to pass a Divorce Law. And, together with this, there would need to be a law that allows unmarried couples who live together to formalize their relationship.

The issue of same-sex marriage also affects the public discourse about gays. Previously, gay rights meant that it is wrong to beat up gays, or to refuse to hire them. Gay rights includes their right to lead a ‘normal’ life, including marriage.

The case of Manny Pacquiao’s comments against same-sex marriage illustrates this point. He was quickly painted as being anti-gay, when all he said was that he was against same-sex marriage. Why? Because now, gay rights  includes the recognition of same-sex couples, and giving them equivalent rights to heterosexual couples. Pacquiao upheld the old version of gay rights.

There could also be an effect on the nature of same-sex relationships themselves. Today, a lot of same-sex couples in the Philippines mimic heterosexual relationships in the sense that one takes on a ‘male’ role, while the other a ‘female’ role. The development of ideas about same-sex marriage will challenge this ‘quasi-hetero’ arrangement. Same-sex partners would then increasingly adopt ‘unisex’ roles.

The whole idea that gays make up a ‘third sex’ should also fade as a result of the discourse on same-sex marriage. With the ‘third sex’ idea, some men claim that they are not gay because they take on the male role in a gay relationship, which is perfectly logical in a ‘third sex’ framework. But with same-sex marriage, the relationship is simply between two men, or two women.

Open Skies?

Lance Gokongwei (president and CEO of Cebu Pacific): Open skies without reciprocity is like Pacquiao with one hand tied.[ Gokongwei: Open Skies without Reciprocity is like Pacquiao Boxing with Left Hand]  This was in response to President Aquino’s signing an Executive Order 29 on “Pocket Open Skies” [Aquino signs ‘open-skies’ orders, finally].  Gokongwei expressed the view of local airlines; but President Noynoy should act on the basis of the advantage such a policy would have for the Philippines as a whole, and not only for the airline industry.

I think that an open skies policy is good for the country, even when it is not reciprocated. Though  it would be probably be better if it was reciprocal. Why will this be good, even if done unilaterally?

Advantages
Increased inbound travelers. Tourists, businessmen etc would come in if a foreign airline opens a line between one of their cities and a provincial destination in the Philippines. The foreign airline is the one who needs to work in order to generate the traffic; after all, it is its own investment. This traffic is new for the most part. For example, imagine a line from Singapore to Caticlan (Boracay). This will generate more passengers for a direct route; at the same time, it may divert some from going to Manila first, and then transferring to a local airline to go to Caticlan. Because many of the new arrivals may not have come without the new direct line, there will be a net gain in tourist arrivals. A reciprocal line from Caticlan to Singapore will not really add too much.

Cheaper Airfares for Filipinos. Increased number of direct flights will mean cheaper airfares – either because of competition, or because shorter routes will be available.

Improved Air Travel Infrastructure. When foreign airlines open routes to provincial destinations, they will most probably use local resources and personnel for passenger processing, cargo handling, even catering. This will help to improve facilities and services at those provincial airports. It can also result in cheaper air transport costs.

Improved transport costs do not only affect passenger travel. Businesses could also benefit from the increased air routes into provincial destinations. Business travel to those places will be cheaper, and transport of goods by air is also facilitated.

Increased Local Travel. A provision in the Open Skies policy states that foreign airlines are not allowed to transport passengers between destinations in the Philippines. The foreign passenger, once in the Philippines, would need to take local transportation to travel within the country. This means that local airlines stand to gain from the increased number of tourists, etc. in the country, since some of them also want to go elsewhere in the country.

Thus, even if unreciprocated, the Philippines stands to gain from Open Skies. If other countries don’t reciprocate, those countries’ nationals would not benefit from the lower airfares, better access, improved airport facilities, higher passenger traffic, etc. that the Philippines will. It would be their loss.

Subsidies
Gokongwei also talked about unfair competition by foreign airlines because these receive subsidies from the government. True, some foreign airlines may receive subsidies. But this would mean that the other country is subsidizing their airline to fly a route into the Philippines. That  country’s taxpayers are thus paying for something which benefits the Philippines. To this, I would say: Thank You.

Only in the Philippines?

We hear the expression “only in the Philippines” quite often. It comes out in TV, blogs, even everyday conversation. I wonder how many people really believe that these things are really “only in the Philippines”; and how many just go along since this has something to do with our national identity etc, even though they know these things are not unique to the Philippines.

I think that there are indeed some people who DO think that these things are really “only in the Philippines” – and I want to respond that most of these are NOT. In fact, I think that there is practically nothing that is truly found “only in the Philippines”.

Food, Faith, Geography
Many things we consider Filipino are actually similar to those found in other Asian countries, because of our common cultural background and history. Food is a good example: pansit and siopao are due to the Chinese influence, leche flan and arroz valenciana are Spanish, fruit salad is American. But even food like kare-kare is due to Indian influence, and eating all parts of the chicken or pig (e.g. “Adidas”, or “IUD”) is common in Southeast Asia and beyond. People think that balot is Filipino; but it is Vietnamese as well.

There are also a lot of things we have in common with Latin America, due to our history as a Spanish colony.  Our common Catholic roots mean that things religious couldn’t be uniquely Filipino. For example, our veneration of the dead during All Souls day is common in Latin America. Self-flagellation and even the reenactment of the Crucifixion is also not unique to the Philippines.

But there are things less obvious which we may think are Filipino, but which we have in common with Latin America after all. Take the barong tagalog: the Cubans have the guayabero; and most of Latin America have a similar shirt that is a national costume for men.  Or the kundiman: we may think this is uniquely ours, but it turns out that the tune of the kundiman we share with some Mexican or Central American countries. It seems that sailors in Spanish galleons brought these over to the Philippines. And thus, the kundiman has Aztec or Mayan roots.

Let’s take geography. The Chocolate Hills in Bohol look nice, but they are not unique. The Chinese have something that I think is even more impressive: the hills are bigger and there are streams between some of them; and you can see them by going by balloon (all we have is a “viewing hill”).
Or the rice terraces. If you still think that it is the eighth wonder of the world, I’m sorry to inform you that not only is it NOT the eighth wonder of the world (there is no such thing, btw), but that it is not unique. There are more impressive rice terraces in Indonesia and Nepal, and some other countries.

Response to Technology
Even things that we think are our “unique” response to technology are not unique. Jejemon may be uniquely Filipino in that it is the Philippine languages that are being “murdered”; but in the broader sense, people from France to China to Thailand are worried about how the young generation is creating their own language on the internet and on SMS.

Or the jeepney. We may think that we are unique in adapting the American “jeep” to become a public utility vehicle as jeepney. But I found out that they did the same thing in Thailand, and they call it the Songtaew.  And of course, our tricycle is the Thai tuk tuk.

Choc Nut
We could say that Choc Nut is unique to the Philippines. But, this is only true in the sense that there is really no other place in the world where such a chocolate delicacy is packaged as Choc Nut (I don’t think so, at least.) However, there is sure to be a place somewhere in the world which has a chocolate product like Choc Nut, but which is called by some other name by the people there.

And this is common for some other things that are supposed to be “only in the Philippines”. For example, someone said that it is only in the Philippines where the crime rate is 0% when Pacquiao has a boxing match. I agree. But this is only because Pacquiao is specific to the Philippines. But, in a sense, it is not really unique. For example, I’m sure that the crime rate in Brazil was also 0% whenever their national football team played in the World Cup.

We could  say that Kinaray-a, Waray, Pangalatoc, or Iranun are spoken only in the Philippines.  (Strictly speaking, this is not true, because of the many Overseas Filipino communities all over the world. But anyway…) This would be true for many language-specific statements, local place-names, or national personalities. After all, we can say that it is “only in the Philippines” where in every municipality, there is a statue of Jose Rizal. But, what would that mean, really?

There is really no particular thing that is unique to the Philippines. But this is not to say that the Philippines is not unique. The combination of all the things we find in the Philippines is unique only to the Philippines. Our national identity as Filipinos is unique.