On the first day of floor debates in the Senate on the proposed P864 billion 2004 budget, Pimentel said the Arroyo government has not only failed to collect the right amount of taxes but has also refused to pursue a major revenue-raising measure endorsed by its own finance secretary.
For his part, Sen. Ralph Recto urged Mrs. Arroyo and her successor, if she fails to win a full six-year term in May, to do something drastic about budgetary priorities, revenue collection and borrowings to make life less difficult for Filipinos.
"Unless this is done, we will be worse off in 2010 than where we are today," he said.
Pimentel was referring to the proposal of former finance secretary Jose Isidro Camacho to increase the excise taxes on tobacco and alcohol products, which would have brought in at least P8 billion in additional revenues. Camacho made the recommendation as early as 2001.
Under the resigned finance secretary’s proposal, the excise tax on "sin" products would be adjusted based on the increase in the retail prices of such products resulting from inflation.
Pimentel said Mrs. Arroyo "failed to exercise her leadership in not pushing actively for the enactment of this bill, which would have brought down the budget deficit that is projected to reach about P200 billion this year, the same as this year’s deficit."
"I think there is a quid pro quo between her administration and the major producers of these products," he said in the course of questioning the sponsor of the budget, Sen. Manuel Villar Jr., who chairs the Senate finance committee.
"Yes, that is possible," Villar responded.
In response to a question from his colleague, the finance committee chairman identified the principal producers of tobacco and alcohol products as San Miguel Corp., Asia Brewery, Fortune Tobacco, and La Suerte Cigar and Cigarette Co.
Pimentel later told reporters that Mrs. Arroyo did not push for the enactment of the Camacho "sin tax indexation" bill because "she did not want to antagonize big election contributors."
In calling for drastic changes in budget allocation, tax collection and borrowing policies, Recto said 31 percent of the proposed 2004 budget, or nearly P300 billion, will go to debt payments, 34 percent to salaries and 17 percent to local governments.
That leaves about 18 percent, or P160 billion, for maintenance and operating expenditures and capital outlay, including infrastructure, he said.
"Over the past two decades, borrowings grew at a much faster rate than the economy, severely hampering our capacity to pay. What does that mean?" he asked Villar.
"It means that we cannot sustain our debt. This matter is indeed a very serious concern for whoever the nation elects as president in May," Villar responded.
Recto said the government, through a combination of policies, should be able to free up more money in the annual budget "so it can create more jobs for our people."
He said if money is appropriated to where it is presently going, life will not change for most Filipinos, or worse, it would be more difficult.