* This is my article in BusinessWorld last October 04, 2018.
The private sector and civil society groups are the
domain of voluntary exchange and volunteerism. In a competitive environment,
people sell something, a commodity or service. If the price is good and
attractive to many buyers and donors, sellers can prosper; if the price is high
compared to quality, buyers and donors will shy away and sellers/providers can
go bankrupt.
The government and state is the domain of force and
coercion. People should not steal or damage/burn properties by others, people
should not abduct, harm, shoot or kill others even if they have a valid
complaint. The state will penalize them hard.
When the government coerces private enterprises to do
mandatory services, to coerce price discounts and yet the state will not give a
tax rebate for the decline in revenue and reduced profit, then the state abuses
its coercive power and this will result in negative, unintended consequences to
society.
In the Philippines, there are many new mandatory
services, mandatory price discounts — on top of existing ones — proposed in
Congress:
1. Mandatory maternity leave with pay for 100 days (HB
4113) or 120 days (SB 1305), parental leave with pay for adoptive parents,
additional 30 days for solo mothers (same SB). It has passed the bicameral
committee.
2. Requiring all employers to pay their employees a 14th
month pay (HBs 402, 3815 & 8095).
3. Security of Tenure (SoT) bill (SB 1826) aka Anti-ENDO
bill, certified as urgent by President Duterte.
4. Granting bereavement leave of 10 working days with pay
to employees on death of an immediate family member (HBs 4071, 6043, 6581), or
five working days with pay (HBs 5711 & 6119).
5. Expanded students’ 20% fare discount (SB 1597) – to
become year-round, to cover all Filipino students from elementary to college
and in technical-vocational schools, to apply even during weekends, holidays
and sem break, and cover all means of transportation from buses, jeepneys,
taxis, tricycles, transport network vehicle services (TNVS), MRT, LRT, to
airlines and passenger ships. The Senate has passed this bill on third and
final reading.
Proposal #1 will lead to less hiring of women in the
formal sector, so more women workers will be relegated to the informal sector
where multiple labor and related laws are often not enforced.
#2, #3 and #4 will lead to less hiring of workers, men
and women, and more employers will use more machines, robots and AI in work
that are generally repetitive. Their customers demand stable or cheap prices so
they must cut costs somewhere. Employees already have vacation leave, sick
leave with pay of 15 working days each, maternity leave with pay of 60 days,
etc.
#5 will lead to higher fares in land, sea and air public
transportation. Since there will be many students, senior citizens, and persons
with disabilities that must be given 20% discount all year round, the fare of
non-students, non-senior citizens must rise to compensate for reduced revenues.
Again, those proposals are on top of existing mandates
and forced price discounts. These will further raise the cost of hiring people
so companies will either hire less people and use more machines and
unemployment can rise. Or some companies will dishonor those new laws and bribe
labor inspectors instead as government corruption remains high until today.
The Philippines also has high corporate income tax (CIT)
compared with many neighbors in Asia. Tax competition is very real as many
countries and economies further reduce their CIT to attract more investors and
make them stay.
The TRABAHO (aka TRAIN 2) bill in Congress, if enacted
into law, intends to remove many fiscal incentives by 2019 but will reduce CIT
from 30% to 20% by 2029. Sigurista.
Since the country’s business competitiveness will be
adversely affected by those mandatory welfarism by private enterprises, the
government should compensate by having a deep tax cut in CIT. An 18-20%
starting 2019 will improve our competitiveness.
---------------See also:
BWorld 253, Cheap, stable electricity vs climate alarmism, September 30, 2018
BWorld 254, Duterte inflation in prices and political insecurity, October 01, 2018
BWorld 255, Improving passenger convenience, innovation vs regulation, October 03, 2018
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