Sponsorship Speech on the Proposed 2012 General Appropriations Act
Sen. Ralph G. Recto’s Sponsorship Speech on the Proposed 2012 General Appropriations Act
Mr. President:
Before I dwell on some specifics of next year’s budget, let me take a great leap backward and discuss some details of the national budget 100 years ago.
Although a century separates 1912 and 2012, the issues they confronted then are the same ones we are confronting now.
The national narrative remains unaltered, even in the field of expenditures, that while today’s budget sports a lot of zeros, the purposes for which they were appropriated then still exist today.
In 1912, total expenditures reached P30.2 million, which is what our government intends to spend in 8 minutes next year.
100 years ago, the education sector can operate on a P3.6 million annual outlay, an amount which can barely build six classrooms today but sufficient then to run 3,396 schools, pay the salary of a teaching corps of 8,360 and construct 135 schoolhouses.
100 years ago, the public works budget was P4.39 million, which already included the paving of 291 kilometers of road, but is what we spend today for the “reblocking” of a postage-stamp -size span in EDSA.
Total capital outlays in 1912 was P8.35 million, an amount which would send a congressman into tantrums today if that is what’s given him as first tranche of his budgetary earmarks.
While the ledger of government disbursements in 1912 featured miniscule amounts by today’s standard, the uses for which they were released were the same as today’s: Solving the Moro problem, eradicating mosquitoes, ending the classroom shortage, promoting rice independence, plugging tax leakage, among others.
If the 2012 budget has allocation for interest payments, so did its 1912 ancestor, but a measly P1.425 million.
The continuing past is also evident in the way the budget was acted by the legislature .If you think that reenacted budgets are a latter-day phenomenon; the 1912 budget was a reenacted one due to the failure of the Philippine Assembly to pass one for that year.
If you think that 21st century annual budgets suffer from devaluation on account of population increase and inflation, the 1912 budget was smaller too by P10,000 in real terms over the 1911 level.
But on one score, the 1912 budget was superior to its 2012 descendant, and that it was premised on a surplus, as revenues realized were P31.2 million, which was P1 million higher than expenditures.
While the Bureau of Customs today plays second fiddle to BIR, 100 years ago it was responsible for 58 percent of total collections as compared to internal revenue’s equity of 30 percent.
And in that age of the abacus, it cost P3.06 to collect P100 worth of taxes.
The composition, however, of some aspects of the revenue effort a century ago hews to contemporary fiscal contours.
For example, personal vices financed the virtues of American-style governance. Wines, liquors, cigars and cigarettes combined for almost P9 million of total revenue take of P31.2 million.
Sin taxes accounted for almost 30 centavos for every peso that was remitted to the public coffers. In contrast, banks chipped in less than 1 percent, which would shed light on the DNA of this sector’s legendary parsimony.
Mr. President:
I intentionally made a detour to this memory lane to drive home one point that is constant in appropriating funds. Whatever the era, whatever the form of government, budgeting is bound by this set of rules:
That appropriation is a mere downstream activity of revenue collection. That it is taxation, which makes appropriation possible. Those expenses are always pegged on income. That the privilege to spend springs from the duty to collect taxes.
Yes, the budget presented to us today is a catalogue of expenditures. But because too often big numbers mesmerizes us, we seem to overlook the important fine print, that every peso that will be spent will be collected from the people. Though the budget contains the price tag of projects it doesn’t state who the payer is, which is the taxpayer because whatever peso we will put in his pocket we actually pick from his pocket first.
And yet, the legislative tradition is that when it comes to the appropriations bill, we only sponsor and highlight the expenditures. We seldom sponsor the revenues it would entail.
It could probably be because of a political culture, which has led our people to demand pork on their plate without giving a hoot on how the pigs are raised and butchered.
So today, Mr. President, let me break from tradition, and, instead of delving on the spending side, walk you instead through the revenue underpinning of this budget, because the projects, activities, programs therein can only rise on the scaffolding of taxation.
Doing so, Mr. President, would likewise give us a better appreciation of the revenue-appropriation dialectics so when the temptation to finance new spending arises , we will be reminded that budgetary intentions are always tempered by revenue limitations.
Before I proceed let me acknowledge the Finance team, the Customs and BIR people who are here.
They are the people responsible for raising the billions in this budget, and for translating our campaign rhetoric into reality.
Because in the division of labor in appropriating money, while it is the Budget people who get the credit, it is they who must raise the cash.
And how much must they raise next year? P1.816 trillion a year or about P4.98 billion pesos a day lang naman. If government were a taxi, they’re the designated payer of the P207.5 million-meter charge per hour.
Of the P1.816 trillion, the revenue portion is P1.568 trillion. Yung balanse na P286 billionang deficit, ibig sabihin uutangin.
Of this financing requirement, the Bureau of Internal Revenue has been assigned a goal of P1.066 trillion and the Bureau of Customs P365.1 billion. Non-tax revenues such as fees and charges (P63 billion) and Treasury income (P69 billion) will put in an additional P138 billion.
Thus on daily basis, Kim’s army must raise P2.92 billion while Ruffy’s fiscal stevedores must haul in P1 billion.
And that, Mr. President, is a hard job to do in a political culture that sees spending taxes as a virtue, but collecting them as a sin; which treats their evasion as a duty, but their imposition a crime .
The fact is, we have begun to treat taxes as text promos: we want to pay little for unlimited services.
And that thinking has even infected many of those in government whose concept of good governance is to grant as many tax breaks to as many people.
One example of this is the grant of P44.8 billion of incentives to BOI and PEZA of which an estimated P26 billion are redundant.
Mr. President:
The DoF secretary has vowed to raise an additional P171 billion next year from BIR and BOC alone. BIR ‘s 2012 target is P126 billion bigger than this year’s level while BOC’s hike in collection quota is P45.15 billion.
Of the P171 billion projected increase, P128 billion will be attributed to economic growth while about P40.5 billion will accrue from “tax administration measures.”
The latter includes the drive to make honest men out of taxmen through various transparency, integrity and anti-corruption measures.
This is good because the law only says we must pay taxes. There’s nothing in the tax code that says that we must leave a tip or pay extra for good service. Good performance at work, after all, is not VAT-able.
If this is the tack to be taken, then our taxmen might consider looking into the ratio of tax burden to sales of major industries, which is below the accepted curve.
For example, the petroleum industry pays a tax – VAT, percentage, excise etc. included – of 11.8 percent out of its gross sales, which is below the 12 percent VAT which is the biggest fuel additive today.
The power sector pays a total tax of 7.34 percent, despite the fact that our monthly electricity bills are peppered with 12-percent VAT charges.
The car industry pays a gross tax of 8.83 percent, yet a VAT is automatically tucked in all vehicle sticker prices.
Telecoms that posted sales of P237 billion last year had a tax burden of 12.46 percent, which is a whisker above the VAT benchmark.
Instead of trying to liposuction more taxes out of plastic surgeons, the BIR may wish to focus on these industries considering that when it comes to the oil sector it has to deal with 21 returns only, 20 in telecoms, and 58 in power.
Each of these corporations has become revenue agents of the government. Tax paid by the consumer on every phone call made, every liter of gas bought, every gallon of water flushed down the toilet are paid to them and not to the BIR. Businesses are supposed to breathe through tax loopholes. But let it be through their own tax obligations and not thorough tax payments simply coursed through them.
Mr. President:
What we see in this budget are columns of expenditures but if we view them from the prism of taxes, we might fully grasp the real value of each, appreciate the sacrifices made by taxpayers, and embrace the need to properly spend them.
For example, the projected individual income tax payments in 2012 of P222 billion will only be enough to pay the salaries of DepEd employees and the benefits of the government employees who will retire next year.
In fact, if you combine individual income tax payments with the projected corporate income tax payments of P364 billion, the sum is still P7 billion short of the total PS requirement of P593 billion for 2012.
Our payroll burden now runs at P1.56 billion a day.
BIR’s forecast excise tax collection of P56 billion from both alcohol and tobacco will just be used to pay for the pension of soldiers, policemen and other uniformed personnel pension which is pegged at about P54.5 billion next year.
Taxes from mining activities in the amount of P1.8 billion will just be used to cover representation expenses of P1.73 billion.
Taxes from automobile sales of about P2.9 billion is what the DOTC will spend in about one month and three days in 2012.
If we will spend all BIR collections from VAT in 2012 – P226 billion – in education it can run public elementary and high schools but only half of the state colleges.
All import duties to be paid in 2012 would only be equivalent to 10 months budget of the DPWH that year.
All excise tax collections of the BoC – from gasoline, liquor, tobacco, vehicles in 2012 – can only finance five and half months of DWSD operations.
Mr. President:
As I’ve said, every expenditure carries a hidden fiscal cost. If our people are informed of the taxes it would take to finance mundane public projects and services, it may lessen their agitation for more of these and demolish the myth that the Senate is like a public mint that can print money or a souped up Wowowee show of 24 genies who can give them what they want.
The fact is that:
It would require the excise tax payments on 1,362,397 bottles of locally distilled rum to finance the concreting of one kilometer of road.
It would require the excise tax on almost 2 million sticks of Winstons to fund the construction of one classroom.
To buy a police car, government must collect the excise tax on the full tank of gas of 45,977 motorcycles.
And to pay for the basic salary of one teacher for one year alone, the tax on 543,000 packs of noodles would have to be collected.
And who will pay for all of these? Not Malacañang, neither the Senate, nor the House, but the people themselves, those whom we represent. Sila na mga boss natin.
Mr. President:
In closing, let me remind our friends from the executive branch who are here today that the budget is meant to be executed because monies collected from the people for the people are meant to be spent.
If the budget is the book of tax rebates them let us allow our people to enjoy the dividends of their tax payments. Tax paid promptly must be spent promptly.
I understand that holes in the spending pipelines must be plugged first before the taps are fully opened. I am, however, sure that after 500 days; the patching up has been finished.
Because if funds would still flow in trickles, then I would be tempted to join those who are clamoring that the finance managers be canonized en masse as apostles of austerity.
Hopefully, the initial disturbing drift toward a kind of parsimony that harms the public more than it helps them will now stop. Otherwise, some agencies may need laxatives to coax more funds out of them.
My friends, reporting a surplus created out of withholding services and strangling infrastructure work can never be a fiscal virtue.
On the contrary, it is anti-progress because funding delayed is development denied.
Mr. President:
I thank you for bearing with this unconventional sponsorship of mine. I do believe that a holistic appraisal of the bill before us entails the presentation of the other side of the budgeting coin, which is revenue.
I urge my colleagues to pass this budget.
