* 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.
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See also:
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
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