Bumbling yellows

The flagship economic measure of President Rody Duterte, the Tax Reform for Acceleration and Inclusion (TRAIN) law, is expected to be the target of the yellows in the coming poll campaigns and Sen. Bam Aquino lately has been taking potshots at it.

The unburnished truth, however, is that his cousin, former President Noynoy Aquino, lacked the spunk to have it implemented, choosing to stick with the “Read my lips, no new taxes” rhetoric, which was even plagiarized from the late US President George H.W. Bush.

Noynoy’s obsession with credit ratings was the main reason for his aversion to reforming the tax system, which was the first step taken by Rody and his economic managers when they took power.

Rody proved Noynoy wrong that the reduction in income and corporate taxes coupled with targeted tax adjustments will be detrimental, since it provided the government the fiscal space to keep vital social programs going.

The country even got upgrades from Fitch Ratings, Moody’s Investors Service and Standard and Poor’s as a result of the bold reforms. Noynoy had claimed that his policies that promoted fiscal prudence resulted in the investment grade ratings for the country.

Noynoy’s fascination with ratings even prevailed over the wide clamor to reform the tax system that has not changed for 20 years.

Budget Secretary Ben Diokno, who is now being targeted by the yellows and other opportunists, for leading the campaign for reforms, argued in favor of the changes in the tax system even amid the wrong priorities under the administration of Noynoy.

Diokno, similar to Rody, had extreme faith on the economy and the resiliency of Filipinos.

He said the guaranteed inflow of some $25 billion to $26 billion overseas remittances from Filipino workers abroad and the promise of increasing business process outsourcing income gives the economy a solid footing.

Aquino was also proven wrong about a runaway budget deficit as a result of the tax reform measure.

Instead of fiscal reforms, Noynoy underspent to keep the budget deficit low in line with the standard prescription of rating agencies and, at the same time, to allow the generation of discretionary funds from savings that are used to achieve political ends.

Diokno kept track of Noynoy’s underspending and his focus on low shortfalls that affect the delivery of public services.

“In 2014, the Aquino administration targeted a budget deficit of P266.2 billion of 2 percent of gross domestic product (GDP). Actual deficit was only P73.1 billion or 0.6 percent of GDP and this is not because of higher-than-targeted revenue intake,” he said.

He added the low deficit was the result of “plain and simple incompetence or poor budget planning or both.”

Targeted spending of P2.284 trillion that year was not met, as actual outlay was only P1.982 trillion or a difference of P302 billion.

Also in 2015, the last full year of Noynoy, the budget deficit target was P283.7 billion or 2 percent of GDP, but actual deficit was less than half at P121.7 billion.

To Diokno, the underspending binge under Noynoy represented lost opportunity for the economy.

Noynoy, thus, was more fearful of foreign ratings agencies than improving the lot of Filipino taxpayers.

The reform was direly needed since, through inflation, all taxpayers have been bumped into a higher bracket and pay higher taxes than what was originally designed under the old system that Noynoy refused to change.

The TRAIN is in its second phase, which targets the overhauling of business taxation and incentives. The first run of the reform measure is already achieving its expected fruits with revenue collections consecutively hitting government targets.

The desperate yellow candidates are creating a big fuss over the second tranche of the higher excise tax on fuel, which is part of the TRAIN package.

It is an exercise in futility, however, as it is still fresh in the mind of voters how the yellow administration of Noynoy bungled the chance to achieve an inclusive economy.