A land transport regulator for the future
Idon’t completely agree with what has just transpired at the Land Transportation Franchising and Regulatory Board (LTFRB) with respect to Uber and Grab. I still believe that the law should be strictly enforced. However, maybe the compromise to allow the operation of unpermitted cars meantime is in the best interest of the riding public.
Of all the LTFRB functions, I believe this to be the most important: “To prescribe and regulate routes of service, economically viable capacities and zones or areas of operation of public land transportation services.” Second to this, of course, is policing and investigation of violations. Others, including the issuance of permits or setting of fares, are not a priority to me.
For I believe that public land transportation (to the exclusion of trains or rail) should primarily be governed by market forces, or by need, supply, and demand as proved by data and statistics. It is in the issuance of permits, and the setting of fares, that regulatory discretion is most exercised, and thus it is in these areas that corruption can most likely occur.
No one will get into the business of transportation unless it is economically viable. There should be a big enough market to profit from that can justify investing in vehicles, drivers, and permits. Theoretically, even without government regulation, the system will succeed as long as market forces are allowed to work. Pricing will be determined by supply, demand, and competition.
For instance, there is no government agency that regulates the business of newspapers, or Internetbased news sites. Anybody with enough capital, and guts, can put up one. Market forces will determine success or failure. This is unlike a radio or a TV station, both of which initially require government approval for use of frequency and for the grant of a franchise.
In public land transport, the solution — to me — is clear: one should be allowed a decent profit from providing service to the public. After all, profit is the main motivation of operators, drivers, and ownerdrivers. This motivation should then be matched with a regulator that focuses primarily on ensuring sufficient, efficient, safe, and reasonably priced public service.
This starts with LTFRB’s extensive use of research, data, and statistics to determine need and opportunity, and in plotting routes. Data should be made public online, for consideration by “investors” and for revalidation by third parties. Then, on the basis of updated and validated data, anybody interested to provide transport services can apply online to operate in “open” routes.
After the submission of necessary documents, which are open to scrutiny by all, “permits” are granted online on first-come, firstserved basis, and for free. No payments for permits. Quotas may be set for specific routes, but as long as all documents submitted are in order, then little discretion need be exercised in approving the permit. This can help minimize the permitting problem encountered by Grab and Uber in the past, and perhaps minimize corruption in the approval process. Under this system, no money changes hands between applicants and LTFRB.
Public utility vehicle ( PUV) operators and drivers with approved permits, prior to operation and within seven days from receipt of permits online, must then create an LTFRB “account” online — through a portal or interface that links LTFRB with the Bureau of Internal Revenue (BIR) and the Land Transportation Office (LTO), and the Philippine National Police ( PNP), among others.
PUV operators and drivers will be required to make use of this portal for all their transactions with LTFRB in the future. Ideally, it should be a one- stop portal for all their transactions with LTFRB, BIR, LTO, and the PNP. The online “account” will also be necessary for PUV operators and drivers to make monthly “franchise” or “permit” payments to LTFRB, which will now be a percentage of monthly gross receipts rather than a one-time fee.
At the same time, PUVs will be provided special trackers or GPS
locators — at government expense — that will allow LTFRB and other agencies to monitor their movement and whereabouts. By gathering data on movement, location, cycle time etc., LTFRB can generate more information with respect to demand, supply, and routes, among others. It can also monitor those operating out of line and those who are illegally cutting trips.
At a rate of 0.5% of monthly gross receipts, a PUV operator grossing P60,000 monthly ( or P2,000 gross daily) per unit will thus pay to LTFRB monthly a “franchise” or permit fee of P300. This will be pay for franchise and the GPS tracker service, and the maintenance of the LFTRB portal and the tracking system. From this, LTFRB will enjoy recurring income. And using the system, even PUV operators can monitor the movement of their vehicles.
Amounts will be paid through banks, and payment forms filed electronically via the LTFRB portal. Also, using the same portal linked to the e-BIR system, the PUV operator will be remitting to BIR a common carriers tax of 3% of monthly gross receipts, or P1800, probably using BIR Form 2251 filed electronically. This should be in lieu of any other income tax payments. And for both LTFRB and BIR payments, the PUV operator will receive electronic receipts.
As for PUV drivers, who work on commission rather than salaries, they will also pay a percentage tax on their income equivalent to 3% of monthly gross receipts, also using BIR Form 2251 (nonVAT). That is, if their total income for the year is above the cutoff for income tax exemption. If so, these monthly tax payments can be credited towards total income tax payments for the year.
Initial development cost of the payment and tracking system can be funded either through concessional loans or aid, or a commercial loan to be paid by LFTRB from its “percentage share” in the gross receipts of PUV operators, and from the collection of fines and penalties from violators. I am certain the system can be put up, because this will not be any different from what Uber and Grab are currently using for their operations. In fact, Grab and Uber may be willing to share expertise in this regard.
But, to make the system effective, LTFRB and BIR should conduct periodic audits of submissions, to ensure that operators and drivers are updated on their “franchise” as well as tax payments to the government. All traffic violations ticketed by LTO or PNP, or even local traffic enforcers, should also be logged on to the system within 15 days from issuance of tickets. Other than data on operating PUVs, the system will maintain a database of licenses of all PUV drivers.
Those who fail to regularly make franchise payments will lose their permits. At the same time, periodic audit will allow LTFRB and BIR to weed out tax cheats. An operator that has not paid his LTFRB fees for two consecutive months will automatically lose his permit, and his details will be immediately forwarded to LTFRB enforcers, the LTO, and PNP as a “colorum” vehicle.
As for going after violators, LTFRB can consider “deregulating” enforcement functions to local government units, as long as it is willing to share with LGUs a percentage of fines and penalties collected from violators. It should look into deputizing local police and traffic enforcers to go after “colorum” vehicles. With data on illegal operators immediately available, apprehension can be more immediate.
Our public transport system is far from ideal. This idea of an LTFRB portal and monthly franchise and tax payments may be farfetched. However, technology now allows us to move out of the present system, which appears antiquated and severely prone to corruption. LTFRB should be more of an auditor rather than a regulator. If Uber and Grab can operate transportation networks efficiently using online systems, why can we not do the same for all other PUVs?
For Grab and Uber, it all started with capitalists investing in systems. And now, both successfully operate in different countries. The same can be done for PUVs here, I am sure, if only LTFRB is willing to invest in a transparent, accountable, and auditable electronic system for its operations. Make it easy — and profitable — for PUV operators to get permits, but compel them to subscribe to the system. And, make it even easier for government to monitor PUV operations, and to collect fees and taxes.
If Uber and Grab can operate transportation networks efficiently using online systems, why can we not do the same for all other PUVs?