Advice to the incoming President

(Note: This is my short article for the Manila Times today, sort of an advice to the next President of the country. I can make 10 proposals or more, of course, but given the space constraint as it is a "Special report" by the paper with a number of other contributors, I just focused on 2 proposals)

Enforce the rule of law and join the lower-taxes competition

Bienvenido “Nonoy” Oplas, Jr.
President, Minimal Government Thinkers
May 23, 2010

We would like to propose only two important measures for the incoming President Benigno “Noynoy” Aquino 3rd to consider in the next six years: to promulgate and enforce the rule of law, and to join the tax competition among a number of Asian countries.

Rule of law means the law is above everyone. No one is exempted from the law and no one can grant exemption from the law. The laws against killing, stealing, plunder, rape, kidnapping and other crimes should be promulgated, and whoever violated the laws against such crimes should be caught and penalized. Even simple traffic laws like “Stop on red lights”, “No U-turn or left turn or counterflow” on designated streets should be upheld and implemented and violators, especially drivers of police and other government vehicles, diplomatic and armored vehicles, should be apprehended.

Many people do not obey the laws because they know and see that government people and policemen, the ones who are supposed to implement the laws and prohibitions, are themselves the first to violate these laws.

Vehicles of the Presidential Security Group are among the worst violators of traffic laws, no parking laws on certain areas. They behave like they own the roads, that they are masters of the public and the taxpayers. If the President and his/her family members are hurrying to go to a particular place or meeting, then they should leave early to anticipate traffic build-up on some streets, instead of whizzing away private motorists as if they are third-class or fourth-class citizens. The next President should change this image of the PSG and the Presidency, someone who respect the traffic rules and the right to road space of ordinary motorists.

The second important move for the next President is to join the tax competition among certain Asian economies like Hong Kong and Singapore. In income taxes for instance, these two dynamic economies that attract lots of foreign investors and tourists have only 16 percent personal and corporate income taxes. The Philippines has 32 percent top marginal personal income tax and 30 percent corporate income tax. The country therefore, can join the competition and bring down its personal and corporate income tax rates to only flat 10 to 15 percent in the next six years. The value added tax (VAT) can be adjusted upwards from the current 12 to 15 percent.

Low income taxes will encourage the entry of thousands of businessmen and entrepreneurs, both foreigners and Filipinos who are based abroad, to set up shop in the country and create millions of new jobs. Many businesses in the US, Canada, Europe and Japan want to get out but have nowhere else to go as income taxes, among other considerations, are not much lower elsewhere.

A related measure will be to reduce the number of taxes and fees that businesses have to pay, from 47 different taxes and fees every year, to only 10 or less. Hong Kong and Singapore collect only four to five different taxes and fees every year from businesses that are setting up in their economies.

Creation of new jobs for the almost 10 million unemployed and underemployed Filipinos by private enterprises should be the best poverty reduction program that any government can give to its citizens. When people have stable jobs, they can better take care of their households’ food, nutrition, education, housing and healthcare needs. Government subsidies for such programs need not be big and the taxes needed to finance such programs and the bureaucracy that will handle the program will also need not be big.