Monday, May 27, 2013

Tax Cut 16: Conserving Fishery Resources by Taxing Demersal Fish Catch?

In late April this year, I have a short discourse with two fellow UPSE alumni in our discussion ygroups regarding fishery conservation. A friend who works at the Bureau of Fisheries and Aquatic Resources (BFAR) wrote,

There are however some cases where government needs to come in such as  in cases of environmental protection. Where there are no controls put in place, people tend to harvest natural resources without thinking about the future, environment, and the like. 
 This is the case in fisheries where we need to put in place time and spatial closures to ensure that the fish stock as provided an opportunity to spawn and regenerate succeeding young ones, where we put in capacity limits to ensure that we do not over harvest and gear restrictions so that we do not catch non-target species. In order to do that, we put in a police force, so to speak, to ensure compliance. Hence, we need a monitoring, control and surveillance systems to ensure compliance. 
 That costs money but what price do you put on the loss of species, especially those that we usually harvest for food.  In this case, markets are altered due to government regulations. Without it, we might end up in a situation where the sardines were lost in the case of one North American country in their Pacific coast.

I replied that the main reason why many fish varieties in the ocean remain in abundant supply is because of market solution to higher market demand for more fish, via aquaculture and fish farming. Lots and lots of tilapia farms, bangus farms, shellfish farms, crabs, lobster, shrimps, prawn farms, even lapu-lapu farms, has supplied humanity, the Filipinos in particular, with more fish. So the pressure to catch more fish in the open sea is not that high.

I read a news where BFAR wants to declare a "close season" for several months for galunggong catch, to allow the popular galunggong to expand further. That of course, is one solution but its full implementation will be low. Will BFAR send hundreds of inspectors to check the fish catch of each fishing boat coming from the sea? That's highly unlikely. So what will happen is that many may comply but a few will still catch galunggong non-stop.

One solution is to allow more fish farming of various species; galunggong, maya-maya, lapu-lapu,  etc. This will greatly expand fish supply of certain species without the fishermen going far out in the sea. I read that the Israelis have modern tech in fish farming, they can grow various species even in desert-like conditions.

Then my perennial friendly co-debater in the UPSE alumni ygroups, Mike Alunan, suggested the following.

We are  only  starting to  develop  aquaculture  and mariculture  fishing  systems,  which  include  sea  ranching, sea farming,  floating  cage fish production,  etc.
But  you  may  possibly  tax  demersal  fish  like  lapu-lapu, as it  penalizes  the wealthier  consumers,  who  can  afford anyway...
tax  specific  fish  catch  as  they  are  unloaded  on fishports  or  at  fish markets.  There   are  basically  two types  of  fish:  1)  “Demersal  fish,”  like  “Lapu-Lapu” which  are  more  expensive and  caught  near shores  mostly  by  small  fishermen;   2)  “Pelagic  Fish”  or  those  “schools  of  fish” like  galung-gong  that  are  caught by  deep-sea fish operators. 
 In short,  the  fish  eaten  by  the  poor  like  galunggong  are caught  by  the  richer  fish operators,  while  the more  expensive fish  like  “Lapu-lapu”  are  caught  normally  by small  fishermen,  whose  numbers  and operations  in  near shore  fish sanctuaries  are putting  pressures  on fishery  resources. It  is  more  likely  that  the small to  medium  fishermen  are  the  ones  involved in  illegal fishing methods  like  dynamite  fishing  that  damage  coral  reefs  and  fish sanctuaries. 
 Taxes  may  not  be  slapped  on  galunggong so  as to keep down  prices  of  cheaper  fish bought and  consumed  by  the   poor. But  you  may  possibly  tax  demersal  fish  like  lapu-lapu, as it  penalizes  the wealthier  consumers,  who  can  afford  anyway.  If  it increases  prices  of  lapu-lapu further,  it  is  alright  as  the  poor  is  not  affected  anyway  as  they  do not  really  buy  this  type  of  fish. But  for  the  wealthier  consumers, they  may  not  care  much  about  the  price  as  they  are  even  willing  to pay  premium  prices  and dine  at  high-end  fine-dining  restaurants.
Fishery  Resource  Exploitation  Excise  (FREE)  tax,  which  will  be   a  fee  which means  it  is  not   really   free  ironically.  Being  a  tax,  Nonoy  may  likely  oppose  this  again. 
 This taxation  system  on fishery  resources will in the  end  be  a  “market-oriented” fiscal policy to regulate this  resource  through a  pricing  system  that  is  induced  by  a  proposed  taxation  system,  that  is  also  intended  to generate  the  necessary  fund  to bankroll  credit  for  ice  cold  storage facilities,  dryers  and  other  processing  equipment  for fishing  communities.

I replied to Mike arguing that those aquaculture and mariculture are free market solutions to previous market failures of insufficient supply of certain fish species (tilapia, bangus, shrimps, prawns, grouper/lapu lapu, sea cucumber, crabs, sea lobster, etc.). Government regulation here should be limited to enforcing private property rights, say between conflicting claims of land ownership among people or for some environmental concerns. Certain market problems or market failures have market solutions, sooner or later.

But his proposal to slap a tax on demersal fish like lapu lapu that are consumed more by the wealthy peoople is terribly wrong. For the following reasons.

One, extending this politics of envy, government should also tax blue marlin,  tanguige, prawns (at P600+ per kilo), lobster, crabs, many other expensive marine products.

Two, more taxes means more bribery and more corruption. Either the fish farmers or fish restaurants will bribe the BFAR or LGUs or police or Coast Guard or BIR people who will assess and/or collect  the tax.

Three, if we assume that all these government personnel have suddenly become saints and will not accept bribes, then government -- through all those agencies mentioned -- will hire more personnel, to assess and collect the tax, or oversee the frontline tax collectors to control corruption. Which means to expand the bureaucracy further to the nth level.

Four, lapu lapu, crabs, etc. that are raised via fish farming should be taxed as well. Because if they don't, then lapu lapu caught from the open sea will only be temporarily transferred say for one day, in those lapu lapu cages, and be harvested the next day at zero tax. This further raises the cost of harvesting these fishery products and wastes labor, even if taxes were not collected.

And five, the politics of envy is wrong. Being rich and wealthy is demonized as evil; hence, they should pay more tax, they should be "penalized" more, they are bloodsucking evil anyway. People should be contented being poor or lower middle class. They will not be penalized, they will even get more subsidies, endless and no timetable subsidies.

See also:
Tax Cut 12: Removing Taxes on Foreign Airlines, April 02, 2012
Tax Cut 13: Remove the Excise Tax on Oil Products, July 04, 2012 

Tax Cut 14: APTU Meeting in Bangkok, March 1-2, January 22, 2013 

Tax Cut 15: Some Resistance to Reducing Personal Income Tax, May 04, 2013

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