For society to move on, it must eliminate ignorance. Ignorance is the cause of many evils: ignorance plus power equals tyranny; ignorance plus authority equals inefficiency; ignorance plus freedom equals chaos; ignorance plus envy equals insanity.

On 9 August 2005, a gathering of scholars led by UP Professors Francisco Nemenzo, Randolph David, and Roger Posadas and other veteran socio-political and economic advocates met at the Bulwagang Claro M. Recto, Faculty Center, University of the Philippines to prepare a proposal for a “program of governance” or a blueprint for improving the performance of the government of the Philippines.

The blueprint described the prevailing situation, offered an alternative analysis of the national problems, and based on the analysis, outlined a set of responses or approaches to the problems. The best way to present the blueprint’s distinctive features is to contrast its analysis and recommendations with those offered by the present government.

In Public Finance and Fiscal Crisis, The Situation: the existing approach is limited to improving tax collection, notably by raising and expanding the scope of the Value-Added Tax.

The main objective is to impress the international credit rating agencies about the country’s ability to pay its obligations to improve the government’s access to foreign credit.

This in itself by then was not a bad idea provided the larger share of the burden is not borne by those who are already poor.

Analysis: The scholars found that tax leakage and corruption were the most important constraints to the government’s ability to improve the fiscal picture. The VAT is the easiest to implement but it is anti-poor. Allotments for social services had already been cut to the bone and could not be pared down any further.

According to the scholars, the guiding principles must be based on good tax administration, progress, and equity. Revenue generation must also be guided by sustainable development objectives. Too many fiscal incentives had also resulted in massive foregone revenues. Large savings could be made if non-performing Government-Owned and/or Controlled Corporations or GOCCs were abolished or merged, and the government bureaucracy was streamlined. Successive administrations retained the non-performing GOCCs as milking cows and as instruments of political patronage.

Recommendations: The scholars recommended that the government protect and increase expenditures allotted basic social and social justice programs as these benefit the poor and serve as the foundation for long-term growth.

Shift to a simplified, universal, and equitable gross taxation system. Shift from specific to ad valorem taxes in the case of liquor and cigarettes and petroleum products, carefully guarding against clever transfer pricing schemes aimed at avoiding payment of higher taxes.

Instead of the administration-sponsored VAT bill that was recently passed by Congress, address the leakage problem.

Support the BIR’s administrative reforms to address leakage. Broaden the overall tax base.

Explore presumptive taxation. Practice the polluters-pay principle by putting in place a targeted petroleum tax targeted at the car-owning middle class and the rich.

This could be supplemented with a carbon tax so that dirty power is more heavily taxed. Impose an across-the-board import surcharge that addresses declining BoC revenues and maximizes revenues from tariff rates that are consistent with World Trade Organization (WTO) commitments.

Rationalize fiscal incentives and phase out special economic zones that have no backward or forward links to the domestic economy (while ensuring safety nets for workers to be displaced).

Abolish or merge losing and heavily subsidized GOCCs. Impose higher taxes on various forms of luxury consumption and real property. Rationalize fiscal incentives. Streamline the government bureaucracy. Compel revenue-generating agencies to promptly remit their earnings to the National Treasury.