Taxes and growth

The lifeblood of society is work. The lifeblood of government is taxes. Work is sustained by returns and earnings. More work, more earnings. Taxes though, is sustained by coercion. That is why the simplest definition of taxation is "compulsory payment to the government."

The Economist showed a graph in its issue last week, "Effective tax rates", below.

Singapore and Hong Kong remains the top dynamic economies in the world today with low taxes. Russia joined the low, flat tax club only recently, with only about 12 percent income tax rate for both personal and corporate incomes.

Countries that want to atract more foreign businessmen and entrepreneurs should consider joining the low flat tax club. Going rate now for a number of countries is 10 percent flat rate, no other tiers or rates.

NINJA loans

In another discussion yahoogrouops where I belong, a friend commented about the Sydney and Jakarta conferences that I attended the past two weeks as "Free Market junket", and that

being a free market guy lets you travel around the world espousing the unabashed "free market" ideas when the whole world right now is reeking with government interventions left and right from - trade sanctions on China, the recent currency war between China, and the U.S.... Unabashed capitalism has led to the sub-prime crisis in America in 2008. Borrowing too much, while the economy was not making new money...

One of the greatest lies of statist thinking is that the recent global economic turmoil that started in the US was a product of free market policies. Wrong. The financial turmoil -- or what most would call as financial "crisis" -- happened precisely because of heavy state intervention and coercion in an otherwise private transactions between banks and borrowers. In particular, between home lenders and home borrowers.

Why? The "NINJA loans" explain it: "No Income, No Job or Assets" loans. The US government -- through the Federal Housing Administration (FHA), Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) -- coerced private banks to give housing loans even to NINJA people. Yes, it was declared a criminal act by private banks if they will refuse to lend housing loan to certain NINJA people.

For instance, FHA lowered the downpayment to get a house, traditionally at 20 percent, to only 3 percent early this decade, down to 0 in 2008. If there is no downpayment required, why rent? Why not get a house, even if you have no stable income? That's plain state intervention and coercion, pure and simple.

See such discussion by Tom Palmer here.

And it is no junket travel. The Americans for Tax Reforms (ATR) money is purely, 100 percent, private money -- from individuals, foundations, corporations, and other fund raising activities by ATR. If donors stop supporting them, end of story. It was ATR money that paid for my plane fare and hotel in Sydney. In return, organizers and participants have to show to ATR donors that the expenses are worth it.

Compare such travel on UN or WB or ADB or RP government or any government money -- well, taxpayers money actually -- that is where most junket travels occur.

Sydney Conf, more pics

Here are some pictures during the 4th Pacific Rim Policy Exchange, held in Sheraton on the Park hotel, Sydney, Australia, September 28-30, 2010. Of the six panel discussions in the conference, excluding 2 lunch speakers and 2 dinner speakers, I don't have picture of Panel 4.

Here is Panel 1, "Obstacles to Investments". From left to right: Panel moderator, Ms. Mary Kissel of the Wall Street Journal (WSJ), Hong Kong; Speakers Peter Holle of Frontier Centre for Public Policy (FCC)), Canada; Jargal Dambadarjaa of Mongolians for Fair Taxes and Wise Spending; and Barun Mitra of Liberty Institute, India.


Panel 2 was on "Free Trade". Moderator was Alec van Gelder of the International Policy Network (IPN, London, UK), standing. The speakers, from left to right: (1) Roger Kerr of New Zealand Business Roundtable; (2) Martin Krause of ESEADE and CIIMA, Buenos Aires, Argentina; and (3) Todd Myers of Washington Policy Center (WPC, Seattle, Washington, USA).

I spoke on Panel 3, "Getting the Free Market Message Out". Our moderator was John Kartch of ATR, middle. The other 2 speakers were (at John's right) David Farrar of Kiwi Blog, NZ; and Dr. Khalil Ahmad of Alternate Solutions Institute, Lahore, Pakistan. My paper there is posted below. I am thankful to Baagi Shagdar of EBI think tank, Mongolia, for this picture. Khalil though, is not shown in this picture.

Here's Panel 5, "IP, Jobs and the Economy". The moderator was Ms. Kelsey Zahourek of the Property Rights Alliance (PRA, Washington DC, USA), standing. The two speakers, from left to right, were Tim Wilson of the Institute of Public Affairs (IPA, Melbourne, Australia), and Michael Williams of Gilbert and Tobin Law Firm, Sydney, Australia.

This is Panel 6, "Best Practices for Reducing Government". From left to right were: (1) Wan Saiful Wan Jan of Institute for Democracy and Economic Affairs (IDEAS), Malaysia; (2) Grover Norquist, ATR President; (3) Peter Wong of Lion Rock Institute, Hong Kong; (4) Parth Shah of Centre for Civil Society (CCS), India; and (5) Ken Phillips of Independent Contractors of Australia.

Below are other pictures outside of the panel discussions.

Part of the audience on Day 1. I took this while I was on stage for our panel 3 discussions.

Another view of the audience in one of two lunch with speakers. Panel discussions end at around 12:45pm, lunch with speaker and open forum are at 1-3pm. Our free time was only from 3-6pm, cocktails and dinner with speaker started at 6pm.

With Alec van Gelder of IPN and Mary Kissel of WSJ. I told Mary that I follow her on twitter. Of course I also follow Alec on twitter. IPN people are among my closest friends in the free market movement, they help us a lot in our work in Manila.

From left: Raymond Ho of Momentum 107, Hong Kong; Rowan Callick, Editor of The Australian, who was our 1st of two dinner speakers; Chung-ho Kim of Center for Free Enterprise (CFE), S. Korea; and Martin Krause of ESEDA, Argentina.

At the farewell dinner. From left to right: Baagi Shagdar of EBI, Mongolia; Parth Shah of CCS, India; Xingyuan Feng of CIPA, China; oh well, I forgot our Australian friend's name here.

And here's another picture, from John Kartch's camera. From left: Mr. You of Japanese for Tax Reforms (JTR); Khalil Ahmad of AS Institute, Pakistan; me; Ms. Keaton Benn of Doner Fundraising; Raymond Ho from HK, and John Kartch.

It was a productive and sometimes mentally-sapping forum because of the fast pace of panel discussions then lunch with speaker. The farewell dinner was a good way to unwind and be merry.

I am super-thankful to the Americans for Tax Reforms (ATR) for the travel scholarship that they again gave to me. Thanks a lot -- Grover, Kelsey, Jane, John, others.

Statists' penchat for more taxes

In one of my various discussion yahoogroups, one member there, an unabashed statist (but personally, we're friends) called my ideas "free market cure-it-all dogmatic belief." He then proposed that portfolio investments (aka "hot money") be taxed. So that recent plans or moves by the Philippine government to increase the toll fees and abolish the MRT/LRT subsidy (resulting in train fare hike) will not be necessary. And that the US government's intervention in its economy ("bail-out", "fiscal stimulus", "quantitative easing" (QE)) is one proof of the failure of the free market model.

Well, at least he did not bring up his earlier useless and pathetic thesis that "services sector is useless, only material economy matters". At least for now.

I called his proposals as plain "state intervention, regulation and taxation cures-it-all dogmatic belief." For the following reasons.

1. There ARE lots of taxes on hot money, cold money, lukewarm money or any other form of money in the Philippines. Capital gains tax, documentary stamp tax, corporate income tax, bank interest earning tax, other national taxes. Then there are local government taxes. Thus, his "more state taxes cures it all" thinking is right on target. Make the number of business taxes double or triple than what they are now.

2. The endless intervention by the US govt in its economy -- bailouts, stimulus, QE, whatever term -- is proof of the US economy becoming more state controlled than a free market economy. Why would a government come in to failing corporations? Corporate expansion and corporate bankruptcy are 100 percent part of capitalism. Why would people and governments cry and wonder when there are large corporate failures? Do they also cry and wonder if there are large corporate expansions, like microsoft, google, facebook, and youtube capitalism?

3. RP's budget deficit is growing like crazy. About P287 B per year from 2005 to 2009, P325 B in 2010, and P357 B in 2011. Government is living beyond its means. A household that has combined earnings only of P30,000 per month but spends on average P35,000 or more per month even without emergencies, can easily be called "mayabang, maluho, magatos, magarbo, irresponsable" (braggart, spending-crazy, irresponsible). Living beyond its means. Then why cant we call a government such terms? Do statists and socialists really stick to their double standard, of excusing endless fiscal irresponsibility and think only of tax-tax-tax as solution in their vocabulary?

4. Removing the subsidy on light rail transit (LRT) and metro rail transit (MRT) is correct. Why subsidize commuters of Metro Manila only? Why not put up an MRT also in Cebu, CDO, Davao, Tacloban, Iloilo, Dagupan, other big Philippine cities and subsidize it as well? Why tax people in the provinces and don't give them transport subsidy, but give only transport subsidy in metro manila?

Being a time-tested statist, I urged him to rally the Office of the President (OP) and the Department of Finance (DOF) to give additional subsidy to all commuters in the whole country. Subsidize provincial and city buses. Expect P500 B/year in budget deficit and call for more taxes. Perhaps DOF should also tax yahoo, yahoogroups and google to raise more money to finance his and his fellow statist friends' favorite sectors for subsidy?

5. Leave current multiple taxes on hot money, cold money, lukewarm money, as they are. Do NOT add more burden. Foreign direct investment (FDI) money needs lots of long-term expectations, like good infra, rule of law, good governance, stable power supply, etc. Hot money does not require that much. If they think they can make money, they will come in. If they don't see such, like having to live with more costs to doing business like more taxes to existing ones, more statist regulations, then they won't come.

EFN Asia 4: Migration and Freedom, Jakarta Conference

The 11th Economic Freedom Network - Asia Conference here in Jakarta ended last night. Below is my article yesterday posted in the lobbyist.biz with original title, Migration and Freedom)

Jakarta, Indonesia – “If goods are not allowed to cross borders, soldiers will.” And “If goods are allowed to cross borders, then workers and entrepreneurs who create those goods be freely allowed to cross borders as well.”

The first quote is from a French free market intellectual in the 17th century, Frederic Bastiat. The second is from Simon Lee, a young intellectual from Lion Rock Institute, a free market think tank in Hong Kong. He showed that quote from Bastiat in one of his presentations in a conference here.

Simon and me are among the hundred-plus participants, speakers and moderators from many countries in the 11th Economic Freedom Network (EFN) – Asia Conference held here Sultan Hotel in the capital city of Indonesia, October 6-8, 2010. The theme of this year’s conference is “Migration and the Wealth of Nations”. The main sponsor is the Friedrich Naumann Foundation for Liberty (FNF) and co-sponsored by six other free market-oriented think tanks – Institute for Economics and Social Research (LPEM, Univ. of Indonesia), Freedom Institute, Indonesian Institute, Atlas, Fraser Institute, and the International Policy Network. The first three are based in Indonesia and last three are based in the US, Canada and UK, respectively.

I was invited in the conference to be one of the 9 moderators in 9 panel discussions in the two-days conference. I moderated the panel on “Preparing migrants before departure” and the two speakers in the panel were Dr. Arianto Patunru, Director of LPEM and Economics Professor at the University of Indonesia, and Zubair Ahmed Malik, former VP of the Pakistan Chamber of Commerce and Industry.

The two speakers gave productive and engaging presentations as they gave their own country experiences in migration of their people to other countries. Indonesia and Pakistan are the world’s 4th and 6th biggest countries in population size, with estimated 2010 population of 231 million and 170 million, respectively. With such a huge population, it is expected that many of their people will be seeking work and other opportunities abroad.

Migration happens because people want freedom. Economic, political, cultural, religious, personal freedom. If they are not happy with their current state in their home province or country, they seek an opportunity to move out and start a new life. This is a perfectly rational human behavior and thus, restricting such freedom by individuals is not an appropriate role or function by governments. Unless of course, if some individuals have committed some crime against their fellows in their home country, they should clear their names first or serve the penalty before moving out.

Remittances by workers abroad to their home countries is growing to several hundred billion dollars a year now. In the Philippines alone, remittances by OFWs through the formal financial system was $17.35 billion last year, and is projected to possibly reach $19 billion this year.

People mobility across countries and continents is a fundamental human rights. With continuing innovation and modernization in information and communications technology, in aviation and the airline and related industries, the opportunities for people mobility is getting bigger and bigger. Some households and firms abroad want more new workers; some workers and managers in other countries want new jobs with better pay and working environment. Some students simply want to learn new things abroad.

It is good that the FNF has initiated this kind of regional conference. FNF is a good ally of freedom-loving people and independent institutes in Asia and other parts of the world.
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Among the old friends in our Asian liberty forum discussion yahoogroups who came here in Jakarta were -- Barun, Parth and Bibek (India), Xingyuan and Jude (China), Wan and Shankaran (Malaysia), Arianto and Luthfi (Indonesia) , Minh and Ha (Vietnam), Simon (HK), Gorawut (Thailand), Carlos and Alvin (Philippines), Robin (Nepal), Seyitbek and Michu (Kyrgyztan), Jyoti (Australia-Thailand), Tom and Kelsey (US), and Alec (UK).

Aco Patunru was a big guy in the conference, he gave the welcome address in behalf of the Indonesian co-sponsors, he presented a paper in a panel discussion (I was his moderator :-)), he talked again in the plenary on the Economic Freedom of the World (EFW) 2010 report, and he gave the intro message of the EFW 2010 Report Indoneian edition.







I told Luthfi I was super-impressed. The Freedom Institute could be the biggest free market think tank in the whole of Asia. They also have a creative source of funding. They put up a political consulting company that's making good money, and that company mainly finances or subsidizes the operating expenditures of the Institute. They also get some individual donors but not much.

There were two highlights of the farewell dinner last night.

First, the reading of the Conference Resolution on "Migration and the Wealth of Nations". The hudred-plus participants of the conference have issued a collective statement that migration is freedom, that government restrictions on the freedom of mobility of people should be relaxed. Simon Lee read the official, 2-page statement. It will be available at the EFN website soon, www.efnasia.org. Also the previous presentation materials.

Second, the live band singing and dancing. Freedom Institute got a local band playing beautiful Indonesian songs. But since the participants come from different countries, there were soon Indian songs, Chinese songs, Nepalese songs, and of course, western music. Many young participants, mostly university students who attended the 2-days Libertarian Youth conference before the EFN conference, also held in the same hotel, led the dancing. Lots of food, lots of singing and dancing, very merry atmosphere.

The EFN members' and observers' meeting will be held today in the same hotel. I told Jyoti, Gorawut, and Rainer Heufers that I cannot participate in the meeting. I left my wife at the hospital last Wed morning when our new daughter was only 2-days old. Have to be with them tonight and thus, must fly this morning.

I am super-grateful to Jyoti that she invited me to become one of the panel moderators in the conference. And of course the FNF for holding this kind of annual conference and for sponsoring my trip :-)
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See also:
EFN Asia 1: From HK to Phuket to KL, September 16, 2006
EFN Asia 2: Hayek in Asia, September 20, 2010
EFN Asia 3: Conference in Jakarta, October 06, 2010

EFN Asia 3: Conference in Jakarta

Here in Jakarta, Indonesia, for the Economic Freedom Network (EFN) - Asia annual conference, October 6 to 8, 2010, at Sultan Hotel. Arrived here this afternoon with 3 other Filipinos, all academic economists -- Dr. Alvin Ang (Univ. of Santo Tomas), Dr. Lawrence Dacuycuy (De La Salle Univ.) and Dr. Ernesto Pernia (Univ. of the Philippines). Ernie represents the Foundation for Economic Freedom (FEF), Lawrence represents the Philippine Economic Society (PES), both are local partners of FNF Philippines. Alvin is sponsored by Atlas. I was also sponsored by FNF and I represent our think tank, Minimal Government Thinkers, Inc.

All four of us are either panel speakers or panel moderators. Ms. Jyoti Sachavirawong, a friend and the overall conference manager, made sure that Filipino participants will wrack a part of their brains for this conference. :-)

The theme of this year's conference is "Migration and the Wealth of Nations". Sort of "modern Adam Smith" :-)

Well, migration is not exactly a "modern" phenomena, it's an old occurence dating back before the modern man (before the homo sapiens species). It's just that with globalization, migration and people mobility across countries and continents is becoming an ever-increasing phenomenon for many people in many countries. Adam Smith of course, is the author of the famous book, "The Wealth of Nations", among the classic work for people who believe in individual freedom and free market.

The conference program is here,

Going through the names of speakers and moderators, I think I personally know at least 1/3 of them. Some were fellow participants of the 4th Pacific Rim Policy Exchange in Sydney, Australia, last week.

This is my first time to be in Indonesia, so I was excited to see this city. Jakarta's international airport looks old -- well, not the usual steel and glass structures in many modern Asian airports these days -- like Manila's terminal 1. But the Jakarta airport is big.

Jakarta's road infrastructure is better than Manila's. I did not see potholes on the roads, for instance. But Jakarta's traffic is a lot worse than Manila's. We arrived at the hotel around 3:30pm local time, meaning non-rush hour, but traffic gridlock was bad. It's good that our taxi driver was very brave on the road, we sneaked through the gridlock by passing through the highway's shoulder made narrow by huge trucks and thousands of cars.

Of the 10 member-countries of the Association of South East Asian Nations (ASEAN), Indonesia has the biggest population, should be about 230 million now, while the Philippines is 2nd biggest at 94 million. So comparing their capital cities, Jakarta and Manila, would make some sense. Jakarta's population is about 20 million? Metro Manila's is 12 million. Among the megacities of the world.

Hectic days for me lately. Just last Sunday midnight, I arrived from Sydney, went straight to the hospital as my wife was scheduled to give birth that day to our second child. I arrived at the hospital around 1:30am of October 4, the baby was born around 4:30am, she's pretty.

I left the hospital early this morning, my wife and the baby are scheduled to check out later today. They should be home by now. Thanks to my mother in law and two sis-in-law, they help watch my family while I am away.
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See also:
EFN Asia 1: From HK to Phuket to KL, September 16, 2006
EFN Asia 2: Hayek in Asia, September 20, 2010
Jo Kwong rocks, February 09, 2010

Advancing individual freedom

(Note: this is my article for People's Brigada News last weekend)

Individual freedom means the individual is free from various types of coercion in his life imposed by forced collectivism. The individual can say what he wants to express, do what he likes to do, so long as no other people are harmed. Thus, an individual can work and work and become rich someday. Someone who got rich by stealing from other people is restricting the others’ freedom.

There are very few groups and individuals in this country that advance individual freedom and the free market. One of which is our think tank, Minimal Government Thinkers, Inc. A non-believer of big and more government intervention, of more taxes, of more foreign aid, of more environmental regulations and energy taxation, and so on.

We do not solicit any form of government money -- local, national or foreign aid. While many groups, NGOs and academic think tanks are swimming with oodles of WB, ADB, UN, WHO, USAID, JICA and other foreign aid money, we cannot accept such funding. We believe that those foreign aid groups are somehow partners in crime by many national governments in justifying endless intervention and taxation of businesses and persons, in removing from any public discourse "personal responsibility" and supplanting it with "government responsibility" in all sectors of society.

By keeping 100 percent independence from any government money, we believe it also gives us 100 percent political, moral and economic independence from them and so we can criticize them anytime that we see fit. I have criticized ADB's and WB's climate loans racket. It is criminal to further bloat RP's already huge foreign debt by coming up with endless reasons, from fighting poverty like those MDGs to fighting "man-made warming."

We turn only to 3 groups for our funding -- donations from individuals, private corporations and fellow free market think tanks abroad. The past 2 years, we have been getting some funding from our partner think tank in Europe. But they too recently, suffered some cutbacks in funding from their donors. Could be related to the recent global financial squeeze. And thus we suffered very little donation this year.

We have to approach potential local donors, individuals especially, who share our vision of advancing individual freedom. Our output though -- ideas for a free society and free individuals -- are non-material, unlike if one is operating a school or a restaurant, or providing shelter and education to street children, where the output is very clear and material.

Potential donors will not be totally holding an "empty bag" and abstract vision. I can give free briefing on certain topics that MG Thinkers is dipping its fingers -- topics on free trade, climate alarmism, drug price control, health insurance centralization, taxation, IPR and health, public debt, privatization, the free market movement around the world, and so on. We can also conduct small group discussions on related topics like Pagcor privatization.

Childcare 3: My 2nd Daughter

Today should be among the happiest days of my life. My second daughter was born around 4:30am today (Manila time), or 4 1/2 hours after my plane landed at Manila airport. I came from a conference, then visited a few Filipino friends in Sydney, Australia.

My wife, Ma. Ella, will give her name. I leave those things to her. Our first daughter's name is Elle Marie, Ella gave that name, well she just rumbled the two words and the letters therein, so from Maria Ella to Elle Marie, that's why. Elle turned 4 years old last Friday.

She's pretty, has a tall nose, and weighed 2.57 kg when she came out. When I looked at her at the hospital's NICU, there were 4 other babies who were born today or the last few days. My daughter is the prettiest of them all! hehehe.

Now have to work even harder. Children are important reminders to people that parental responsibility cannot be delegated as "government responsibility" as much as possible.

And there will be more peace in society if there is less coercion and forced redistribution of income and entitlements among people, with a huge army of people administering such large-scale social engineering.

Meanwhile, I promised my friends in facebook who greeted and congratulated me, that I will not post political comments in my fb status in the next few days, as one form of my personal and family celebration. Political commentaries will continue in this blog, the "ceasefire" is only in my facebook status.

To my wife Ella, my first daughter Elle Marie, and my second daughter -- I LOVE YOU ALL. I am the hubby, I am the father. I will take good care of you.