Tax reform, now

The good news last week was that our economy grew 6.5 percent in the second quarter. Question is: how do we sustain, even accelerate, the momentum?

Quite a few economists think that we should grow at least seven percent consistently year in, year out, in this generation. If this is achieved, we will be in a position to reduce poverty dramatically.

But how can we really move ahead if we don’t build? How can we build, if we don’t have the funds? How can we have funds if we don’t raise taxes? (Of course, the alternative is to borrow.) How can we raise taxes, if we don’t sacrifice?

Raising taxes is a tough sell. But like it or not, it is necessary. The reality is there is no free lunch.

Members of the Lower House had no problem approving the tax reform bill (the first of several reform packages) in no time. Senators, on the other hand, are still trying to sort out the provisions which are claimed to be “anti-poor.”

But are these measures, like additional taxes on sugared beverages, really anti-poor? From my end, they are more like pro-health.

Whatever the case, a decision on the proposed tax reform package has to be made now. Not to- morrow. Not next week. Sayang. We are incurring much opportunity loss.

Passing the tax reform package, however, is only half the solution. We have to make sure that we also improve tax collection efficiency. We can start by making it easy for taxpayers to pay, eg., by simplifying our tax forms.

An improvement in public perception of our collection agencies will also do wonders. Our revenue and customs collectors must not only be honest and competent. They must also be perceived as honest and competent.

But at the end of the day, what will matter is how the funds are actually used. Are they used for the purposes intended? How much of public money is lost due to corruption? Is public money spent in full and on time?

How often have we heard of “low absorptive capacity” of front-line agencies leading to their failure to spend their budgets.

Here is where good governance comes into play. One aspect of good governance manifests itself in, among others, zero or minimal corruption, good planning (no “analysis paralysis”) and timely execution.

And by execution, I don’t mean EJK.