Wednesday, 17 February 2010

No genius for this challenge

Business Mirror

THIS time, there’s nothing vague about the accounts coming out of Malacañang Palace. President Arroyo, declared her aides, on Tuesday signed into law Republic Act 9994, or the Expanded Senior Citizens Act, which grants more benefits to senior citizens and restores their full 20-percent discount on goods and services that had been diminished by the imposition of the expanded value-added tax (E-VAT).

The 20 percent provided in the original law for seniors was effectively whittled down to 8 percent when the VAT was expanded to 12 percent and imposed on their purchases several years ago.

The Chief Executive has never tried to play down the huge fiscal cost of the new measure—estimated by the Department of Finance (DOF) at P1.68 billion per year—in a year when the government can least afford it, given the projections that the deficit may hit anywhere from P290 billion to P300 billion. And yet, as she instinctively replied when asked at a media lunch two weeks ago, on what she would do to the seniors’ bill, she replied, “As much as possible I don’t veto a measure like that. At the very least I’ll let it lapse into law.” She was aware of the serious fiscal impact the new law would have, but then wondered aloud, “Why didn’t they catch it when it was still in Congress?” Meaning, the fierce battles should have been fought there, with supposed congressional allies of the administration fighting it out with fellow lawmakers whose tendency might be to simply pander to the gallery to score brownie points for the election. So, she signaled after that lunch, the die had been cast, and she wasn’t about to let them just dump it on her lap for her to kill—and be the villain for it.

If the accounts by Palace officials were correct, she, however, took her time signing it, given the understandable agitation of the finance department, and then decided in the end after hearing the final arguments from two senior Cabinet members—one for veto, Finance Secretary Gary Teves; and one for signing the bill, former social-welfare chief now Health Secretary Esperanza Cabral.

As we said in an earlier space, perhaps the feared administrative nightmare by the Bureau of Internal Revenue (BIR) and the merchants involved in effecting the discounts would have been avoided if the lawmakers had simply stuck to the original plea of the elderly—to restore the discounts to 20 percent—and not tucked in so many other freebies that, while sure to be appreciated by the old folk, could pose difficulties in implementation, like the discounts on water and other utility bills. But all that is water under the bridge now, pun unintended, and all those involved—DOF, BIR, utility firms and the merchants of medicine and other goods covered by the new law—must bite the bullet.

Meantime, we would counsel all the presidential aspirants to review very well the particularly tedious process this piece of legislation took, if only to learn from it, especially on how to balance public-welfare issues with fiscal considerations. This is crucial to them, because the revenue to be forgone by this new law would form part of the new president’s problems. As the forum of presidential aspirants hosted by the Foreign Correspondents Association of the Philippines showed on Monday, while most of the bets shared the consensus that the fiscal challenge is serious this year, they provided very disparate views and strategies in coping with it.

It simply means the genius hasn’t been born yet who could lick the deficit and related problems in one fell swoop. Most of the fare we’ve heard so far comprises part angry rhetoric about jailing plunderers and smugglers, and part wish list. They still have over 10 weeks to go back to their agenda-planning and study very well the fiscal challenge faced by the country they want to lead. This far in the debate game, we haven’t even scratched the surface yet of all the interrelated issues that a new leader must understand. For one, the spaghetti bowl of trade and tariff agreements coming into force this year by itself already presents an entirely new subset of problems—for the state, for industry and labor.

One can only hope whoever wins on May 10 has set his mind to really reckoning with all these challenges.

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