WEALTH TAX, JUNKING ‘ODIOUS DEBT’ KEY TO RECOVERY–NGOS

TAXING wealth and cancelling “odious debts” could help the Philippines get back on track to a better development path, according to the Freedom from Debt Coalition (FDC) and Ibon Foundation Inc.

In a statement, FDC President Rene Ofreneo said taxing the country’s top billionaires and cancelling debts would help finance efforts to carve a better development path.

Ofreneo said bringing back the economy to the “old normal” would not benefit Filipinos because socioeconomic inequality was already high at that time.

“Technocrats are hoping to open up the economy to bring it back to the ‘old normal.’ And yet, the old pre-covid normal failed to deliver a balanced and equitable economic order as reflected in deepening social and economic inequality and trade deficits,” Ofreneo said.

“With the Covid pandemic likely to remain untamed until 2023, this approach can only create endless sufferings for the people who are given token ‘ayuda’ by a government ineffectually piloting a sputtering economy,” he added.

In a recent forum, Ofreneo along with Ibon Foundation Inc. Executive Director Sonny Africa and Roland Simbulan of Center for People Empowerment in Governance (CENPEG) lamented the weak government response to the pandemic despite increasing the national debt.

The Department of Finance (DOF) earlier said the government secured $15.49 billion or roughly P752.3 billion in loans and grants from foreign lenders to fund the government’s response to Covid-19 pandemic.

The total amount already includes the $1.2-billion or P58.5-billion financing it recently secured from multilateral lenders for the country’s purchase of Covid-19 vaccines.

The DOF said they expect the national government’s debt this year to reach 57 percent of GDP. The country aims to borrow about P3 trillion this year, almost the same amount it borrowed in 2020.

As of end-2020, the country’s debt-to-gdp ratio surged to 54.5 percent—a 14 year-high—coming from a record-low 39.6 percent in the previous year.

FDC and the other panelists said this could lead to a “debt bomb,” and to avert this, the FDC and the panelists in the forum called for debt relief or the suspension of debt payments during pandemic.

In particular, FDC is pushing for the re-audit and cancellation of 21 odious debts identified in Congressional committee hearings, in order to free up funds that can be used for immediate economic relief for the people and government’s Covid response.

Wealth tax

FDC and Ibon are advocating for passage of a Wealth Tax. Taxing the country’s top billionaires could bring in billions of pesos into public coffers, they said.

In a recent statement, the Bukluran ng Manggagawang Pilipino (BMP) said, based on the 2021 Forbes Billionaires List, the combined wealth of the 17 richest amounts to $45.6 billion or P2.2 trillion, equivalent to 12.7 percent of the 2019 pre-pandemic GDP.

BMP said proceeds from a wealth tax would fund a sufficient national recovery program that could be a viable alternative to foreign borrowings.

These wealth taxes, BMP said, will not impoverish billionaires. Based on the data in the Forbes list, most of the dollar billionaires will still have a net gain in wealth despite a 25-percent one-time levy.

“The situation provides us with the opportunity for rethinking —therefore we are pushing for an alternative People’s Stimulus initiative from below,” Ofreneo said.

“The pro-people development framework and philosophy in the country’s current pandemic response is missing.”

Stimulus

IN a separate statement, Ibon said a real stimulus package that prioritizes emergency cash subsidies, support for small businesses and farmers, and strengthening the health system, should be the priority of lawmakers.

This means lawmakers should pass laws that contain the pandemic as well as help the sick and millions of jobless Filipinos faced with falling incomes. These kinds of laws should be prioritized over bills that seek to attract more foreign investments.

Ibon said economic recovery is hampered by the spread of Covid-19 and the lack of fiscal stimulus. It said the 11.3 percent increase in government spending last year was below the average annual increase of 14.3 percent from 2017-2019.

Earlier, Ibon proposed a P1.5trillion stimulus. This includes P540 billion in emergency cash subsidies for 18 million poor and low-income families or P10,000 per month for three months; and P101 billion in wage subsidies to micro, small and medium enterprises (MSMES) to support a P100 per day wage increase for three months.

Last week, UP School of Economics Professor Toby Melissa C. Monsod said government spending that is not directed at boosting health capacity may do more harm than good.

Based on her recent study, the lockdowns were not the reason for the economic contraction last year but the country’s lack of capacity to detect and respond to the pandemic.

Monsod said, however, that the 2021 budget does not reflect this priority since the budget of the Department of Health (DOH) was reduced. This, while the infrastructure budgets for the Department of Public Works and Highways (DPWH) and Department of Transportation (DOTR) were increased.

Investing in health capacity should be a priority moving forward since, Monsod said, the lack of investments in this sector 20 years ago could have saved the country billions.

Based on her research, Monsod said, if the government in the 2000s only invested in laboratories, economic growth would not have plunged to 9.6 percent last year.