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Reorient development indicators—FDC

Budget watchdog Freedom from Debt Coalition (FDC) said President Duterte and his economic managers are resorting to the previous administrations’ economic growth mantra of using “capacity to pay” as a measure of debt sustainability and economic soundness. 

“Debt-to-GDP and debt-to-revenue ratios are tired justifications for government’s huge borrowings and economic activities that everyone knows have failed to address poverty and inequality,” FDC president Ed Tadem said.

“President Duterte and his economic managers are again using these indicators to defend this administration’s huge new loans of roughly P8.3 trillion, for its massive infrastructure spending,” Tadem added.

GDP or gross domestic product is the sum amount of all goods and services produced in the country. Mainstream economics use GDP to measure economic progress.

“What GDP measures is economic quantity, not quality of life or national well-being. It has become a convenient tool for gauging a country’s capacity to pay its debts. But what gets lost in these justifications is the actual impact on people and the environment, whether the much-touted economic growth and credit standing of the Philippines have created a better life for most Filipinos,” Tadem said.

Last May, the Social Weather Stations’ (SWS) first quarter survey for 2017 on self-rated poverty, hunger and joblessness revealed that 11.5 million families consider themselves as poor, 8.1 million families are food-poor with 2.7 million of them having experienced involuntary hunger in the past three months. Meanwhile, jobless adults are estimated to be at 10.4 million.

Previous administrations have been criticized for being too preoccupied with GDP-based economic growth that benefited the rich but fell short of reaching the poor. During the campaign period for the 2016 national elections, the Duterte camp was vocal in criticizing former President Aquino’s high GDP growth rates that failed to “trickle down” to the masses.

FDC added that recently, Budget Secretary Benjamin Diokno claimed the country’s debt indicators will improve despite the government’s planned acquisition of new bilateral loans from China, Japan and Russia.

The administration projects that expected GDP growth rate and estimated annual P200 billion additional revenues from new tax measures will ensure the country’s ability to repay its debts.

The House of Representatives has just passed the bill containing the administration’s proposed tax reforms.

Several quarters, including FDC, have warned that the tax measures are regressive as low-income groups will pay more with the expansion of goods and services to be covered by the 12 percent value-added tax (VAT) and additional excise taxes on petroleum products and sugar beverages.

“FDC advocates for an economy that ensures provisioning for life in all its fullness, a life with integrity and dignity. The question that government should be answering is: who will shoulder the burden and impact of improving debt indicators?”, Tadem said.

He said there is no question that tax reforms are urgently needed to generate greater public money for development needs in the Philippines.

“While more awareness-raising and public discussions on the implications of the Tax Reform for Acceleration and Inclusion (TRAIN) need to be done, unfortunately, the first set of tax reform proposals of the Duterte government has rapidly passed through the House of Representatives,” he said.

“We believe however that the TRAIN foreshadows burdensome consequences especially for the poor and low to middle income groups,” he added.

Much lauded as beneficial to low and middle-income groups is the restructuring of the Personal Income Tax (PIT), which raises the threshold for paying PIT from P10,000 to P250,000.

Low and minimum wage earners remain exempt as before, and will not be affected. “The PIT-exempt threshold should have been set higher, considering that those in the P250,000 to P400,000 bracket still live precarious lives,” he said.

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