* This is my article in BusinessWorld last May 15, 2019.
Kuala Lumpur — During the May 2018 Malaysian elections between former PM Najib and returning PM Mahathir, the latter was an underdog, he promised that if he wins, he would abolish the gross sales tax (GST) of 6%. He won, he did what he promised, and GST went down from 6% in May to zero in June. Result was drastic, across the board price declines and inflation rate went down from 1.8% in May to only 0.8% in June 2018. The average inflation January-May 2018 of 1.7% became 0.6% in June-October 2018.
This is the kind of real inflation-busting policy reforms we wish to see in the Philippines. Last year, 2018, we had the highest inflation rate at 5.2% in East Asia. Second and third highest were Vietnam (3.5% )and Indonesia (3.2%). Malaysia had only 1.0%. Year-to-date 2019, the Philippines still has the highest in East Asia with 3.6% while Malaysia has -0.3%.
Now the 2019 senatorial elections has produced unofficial results and the top 12 so far are Cynthia Villar, Grace Poe, Bong Go, Pia Cayetano, Bato dela Rosa, Sonny Angara, Lito Lapid, Imee Marcos, Francis Tolentino, Koko Pimentel, Nancy Binay, and JV Ejercito.
Just outside the Top 12, as of this writing, is opposition reelectionist Senator Bam Aquino, who is opposed to oil tax hikes under the TRAIN law of 2017, the main cause of inflation spikes in the country. And he may lose.
This means that an important policy alternative to reducing inflation — reverting the VAT from 12% (the highest in East Asia) to 10%, even 8%, in exchange for drastic reduction in exempted sectors — may not be entertained.
The top two senators, Cynthia Villar and Grace Poe, would remain to be good in economic legislation. Senator Villar headed the enactment of the Rice Tariffication Law (RA 11203) while Senator Poe will help enact an amendment to the Public Service Act (PSA), an 87-year-old legal dinosaur that restricts competition from foreign players in five sectors including telecoms and transportation (land, sea, air). We need this kind of economic liberalization that will help reduce inflation and expand mobility of goods and people/services across the country, across the globe.
Philippine Congress 2016 to 2019 has produced plenty of local laws. In particular, from March to April 12, 2019, Congress passed 38 new laws, only 7 of which are of national application (18%) while 31 are local or franchise laws. Some 14 laws are not shown or missing in both the Senate and House of Representatives list.
From the perspective of tax-conscious and regulations-wary citizens, three of the seven may be good laws — 11234, 11239, and 11261. The other four are either neutral or would mean more bureaucracies, like 11235.
We hope to see a new set of senators and representatives who are aware of the defects of high taxes, economic nationalism and restrictions. In the process, they will pass legislation that can substantially reduce inflation and interest rates, and propel more economic growth and job creation.--------------
BWorld 324, MORE price declines, less Dutertenomics, May 12, 2019
BWorld 325, Power shortage as election issue, May 13, 2019
BWorld 326, Low growth, high taxes as election issue, May 14, 2019