NOTES ON The Medium-Term Philippine Development Plan for the period 2004-2010: Income Distribution and the Burdens of Taxation and Debt Payments

Income Distribution and the Burdens of Taxation and Debt Payments




Distribution of Family Income, 1988-1997

Family Income Groups Share in Total Income, %

1988 1991 1994 1997

Bottom 30% 9.3 8.5 8.8 7.8

Middle 40% 27.4 26.2 27.4 24.9

Top 30% 63.4 65.3 63.7 67.2

Note the “entrenched inequality” in this distribution table where a small segment of the population controls most of the wealth and accounts for most of the income.

Situationer Ways forward.

Income distribution and taxation



Government funds are raised from an inequitable and unevenly distributed economy.

This can perhaps explain why it is difficult to raise taxes – as the rich and the powerful resist – and also why it is difficult to make government expenditures pro-poor – the rich and powerful are able to influence government to address their concerns first.





We also have comparatively low revenue efforts. The low salaried group tend to be the “captured” tax payers.



In addition, government collects revenues from an economy where income-producing activities are unevenly-distribute geographically, and are generally concentrated in a few urban centers. This maldistribution of economic activity explains why government expenditures are concentrated in Metro Manila and other cities even as the population in greatest need for government services are in the countryside.



Official development assistance.



In 2004, more than 80% of government revenues went to debt payment; where the Philippine government earns 5 pesos, 4 pesos go to paying our foreign debts.



Wastage of foreign loans, i.e. commitment fees paid for on-going projects as of 2004 is almost US$50 M. • STOP nominal policy frameworks and

development strategy plans where available resources are never sufficient for the declared priorities.

• STOP passing legislation with unfounded

mandates.

• STOP adding insult to injury. With the last

30th percentile so impoverished, announcing reforms that will never be is like salt to their wounds.

• Improve revenue effort level relative to GDP

by increasing tax share (direct taxes) levied on and collected from the better-off families.

• Improve benefit yield from government

expenditure:

• Partnerships (health and education)

• Accountability (defense and police service)

• Deregulation

• Incentives for planned parenthood

• Government productivity enhancement



 World Bank-funded Philippine government anti-corruption program and implementation of the Philippine government reorganization and plan.



 STOP foreign and local borrowing. While completed power and energy production, as well as transportation infrastructure projects were loan-funded and have actually enhanced production capacities, parts of the national debt were misspent, wasted or stolen.

References:

1. AIM Policy Center, ed. Luningning Achacoso-Sevilla , “The Ties that Bind: Population and Development in the Philippines 2nd ed.”2004

2. ODA Watch, “ODA Policy in the Philippines: How can Civil Society Engage and Contribute”