Investors’ nightmare

One of the salient features of President Arroyo’s 10-point national economic agenda is the creation of 10 million jobs for the next six years. That means, from the day she made the pronouncement (that was during her last State-of-the-Nation-Address) to the end of her term in 2010, she must work doubly hard to attain this target.

I do not want to sound pessimistic, but if the administration does not restructure its prevailing investment policy and make it conducive to business, I don’t think she will be able to meet her target, unless some hocus-pocus is done.

Unpredictable business policies make it difficult for the country to lure prospective investors. The executive and legislative branch is however not entirely to blame. Even our own judiciary has come out with decisions that have far-reaching effects on the way business is done in this country. One case in point is the Supreme Court’s recent nullification of the automation of the 2004 elections.

The Supreme Court’s decision was based on allegations that the Commission on Elections (Comelec) failed to follow the bidding rules when it awarded the P1.3 billion contract to the Mega Pacific Consortium (MPC).

The opponents of the automated contract succeeded in convincing the SC to junk the Comelec-MPC deal. The dissenting opinions of Chief Justice Hilario Davide, Jr. and Justice Jose Vitug however deserve much attention.

Justices Davide and Vitug opined that there was no indication that graft and corruption attended the bidding process or that the contract price is excessive or unreasonable.

Also, the two justices claimed that the procedural remedy of certiorari and prohibition is improper as there were various disputable facts, which could only be resolved in a regular hearing with the parties presenting evidence in support of their averment.

They noted that "the Supreme Court is not a trier of facts and a review of evidence is not proper in a certiorari, prohibition or mandamus proceeding." That goes to show that the SC should have not acted on the petition and instead remanded the case to the lower court. The petition was directly filed with the High Tribunal.

Months after the controversial decision, the issue has become more apparent when Comelec Commissioner Resurreccion Borra presented to the Senate Blue Ribbon Committee the bidding process followed prior to the awarding of contract to the MPC.

The Senate committee was supposed to conduct an inquiry into the alleged "anomalous" deal but when based on Borra’s presentation, it turned out that the public bidding went through the legal process and the contract was, in fact, advantageous to the government.

Borra noted that the contract with the MPC was the lowest deal secured by Comelec compared with its contract with the supplier of the automated counting machines (ACMs) used during the 1996 and 1998 ARMM elections.

The price bid was also lower than the one tendered by Total Information Management Corp. (TIM), which offered a limited coverage and machines that have not been upgraded yet.

The nullified automation contract added to a number of court decisions that spawned serious business implications. Among these decisions are the cancellation of contract between the Public Estates Authority and Cyber Bay Corp. on a 750-hectare Manila Bay reclamation project, the SC’s reversal of its decision awarding control of Philippine Shipyard and Engineering Corp. to a consortium led by JG Summit, and the junking of a petition to nullify the privatization of Philippine Associated Smelting and Refinery Corp., which was sold to Glencore International AG of Switzerland.

Our flip-flopping stance is turning into a nightmare for investors. No businessman would dare put in money into something that is unpredictable.

With this kind of situation, the 10 million new jobs target by 2010 appears unattainable.

New Taxes NTA-Style

"Death and taxes may be inevitable, but they shouldn’t be related." This was what US Congressman J.C. Watts Jr. told his colleagues when they had floor discussions on whether to abolish or prolong the life span of the federal estate tax, more popularly known in Washington as the "death tax."

In the Philippines, death and taxes are like conjoined twins, especially for businessmen whose businesses have been wobbling for quite some time now because of the economic pinch. A hike in taxes on their products would actually mean a nail on the coffin.

New taxes seem to be in vogue these days. Riding on the tide of imposing new taxes, a certain government agency has actually begun collecting exorbitant new fees without the benefit of public hearings and publication.

National Tobacco Administration (NTA) chief Carlitos Encarnacion, already at his rope’s end justifying his existence and budget with President Arroyo, is apparently hoping to please his Chief Executive by motu proprio raising collections from the tobacco industry. The same industry he is mandated to promote and protect, he is now trying to kill softly with exorbitant new fees.

The magnitude of the increases is such as to qualify them as revenues and not just fees. The sad part of it all is that the NTA doesn’t even have the power to tax. The power of taxation is essentially legislative and the Constitution is very clear that all tax measures should emanate exclusively from the House of Representatives.

In his NTA Memorandum Circular No. 1 (series of 2004), Encarnacion wants to levy an inspection fee for every kilo of tobacco that will be exported. Instead of jumping with joy that local tobacco farmers have begun exporting their crop again after years of being in the doldrums, Encarnacion is jumping in on the farmers hoping to get his share from the fruits of their hard labor. The poor tobacco farmers‚ income, whatever is left of it, may not be enough to tide him over to the next harvest season. This runs smack against one of this government’s economic imperatives- that of promoting exports. Does his boss know what he is doing?

The NTA has started collecting a so-called license/permit fee amounting to P7,500 for every importer and exporter of tobacco-related products; a processing fee of P300 for every application for an export/import commodity clearance; a "monitoring, regulation, supervision and/or evaluation" fee for cigarettes amounting to P10 per case for trans-shipment, P6 per case for local legitimate manufacturers, and P20 per case for importations.

Curiously, when the Subic Bay Metropolitan Authority protested against the inspection fee for transhipment, the NTA backed off.

Hold on one second, Mr. Administrator, where in your charter does it say that the NTA has jurisdiction over cigarette importers, exporters, and manufacturers?

Crazier even is the fact that the inspection fee you are charging is much, much higher than the inspection fee already being charged by the Bureau of Internal Revenue, a legitimate revenue generating arm of the government.

On top of these, the NTA has also imposed a 10-centavo per net kilo fee and a P3 per net kilo fee for "unmanufactured and wholly and/or partially processed leaf tobacco and tobacco related supplies, materials, and ingredients (in conventional cargo, packed in bobbins, boxes, bags, sacks, crates, etc.)."

The Philippine Tobacco Institute, apparently surprised by the NTA memorandum circular, said no public hearings were conducted.

It appears now that the NTA, whose charter dictates that it should only promote the welfare of tobacco farmers and improve the quality of raw tobacco leaf, has usurped the power of Congress to generate revenues for the government.

It has now dabbled in the revenue-generating arena instead of taking care of some 62,000 farmers located in Ilocos Sur, Ilocos Norte, La Union, Pangasinan, Abra and 22 other provinces up North.

If this is left unchecked, other government agencies may follow suit.

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