Gloria’s fiscal cycle

EDITORIAL

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11/16/2007

Gloria Arroyo is back in familiar territory.

A fiscal problem is again rearing its ugly head against Gloria’s administration in spite of her repeated pronouncements that her focus has been on the economy and improving governance rather than politics.

Despite the sale, or rather the fire sale, of key state assets, mainly power plants, the target of limiting the budget deficit to within P63 billion is in danger.

Another sign that Gloria is again back to her usual state of budgetary fix is the growing state debts that should have been pared down as a result of the strong peso and the strong dollar inflow to the country.

Economic officials were earlier making a big show out of the monthly $1 billion flowing into the country from remittances alone and the bigger flow of foreign exchange into the stock market from foreign funds.

The country’s debts even grew by P107 billion in July to total P3.764 trillion despite the strong peso that should have reduced the equivalent foreign debts that are mostly denominated in US dollars.

The government, however, has shifted the bulk of its borrowings from the domestic market, which means local banks.

Economic officials were earlier boasting that the government may dispense with the need to increase borrowings due to the surge in foreign currencies entering the country.

The problem with Gloria’s fiscal management remains in tax collections.

The government’s main collection agency, the Bureau of Internal Revenue (BIR), has been consistently missing its collection goal, not due to anything else but machinations within the government itself to favor certain interests.

The BIR missed its October collection goal again by P6 billion or a collection of P52.5-billion against a P58.5-billion goal.

In the year to September, the BIR was already P45-billion short of target with its P521.9-billion collections against a P566.9 billion goal.

The maneuvering inside the government was best typified by the controversy surrounding a sudden turnaround by the Department of Finance (DoF) by allowing a foreign cigarette brand to pay a lower tax after the intervention of a supposed relative of a top Finance official despite the law allowing only an increase in the excise tax on cigarette brands, not a reduction, which is logical under the fiscal trouble that Gloria is perennially in.

The conflict over the excise tax collections merely shows how entrenched interests can get their way through on tax payments by negotiating with the highest officials of Gloria for certain considerations.

That becomes the root of the problem, since such negotiated tax payments can go all the way down. The most delinquent in hitting tax targets within the BIR is the so-called Large Taxpayers Division that groups the country’s biggest corporations and richest person, the reason which is easy to interpolate.

The government would not be in a recurring fiscal quicksand if Gloria indeed devotes her full time on governance.

The truth, however, is that Gloria is busy the whole day keeping her political alliances well taken cared of to nip in the bud any attempts to throw her out of office.

The truth is the shortfalls are being incurred as a result of skewed priorities in which fund allocations are determined by alliances and the need to sway more of those willing to enjoy the fruits of Gloria into her ranks, rather than economic development considerations.

Unbridled corruption that has become a tradition under Gloria, of course, is the biggest single cause of the fiscal malaise afflicting her government.

Gloria gave the government the distinction of being the most corrupt in Asia and among those with the worst corruption record in the world.

Corruption and political patronage will be Gloria’s legacy to the Filipino people.

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