Doorway to unpopularity

For more than a year and a half, President Noynoy Aquino has resolutely pursued his vision to rid our country of corruption. From tax evaders to smugglers to corrupt government officials from the Arroyo administration, P-Noy has led the campaign and however effective his campaign maybe, there is no doubt that he has done what he said he will.

What made all of this possible in part was the fact that the tax evaders, smugglers and corrupt officials were guilty and left enough bread crumbs for the P-Noy administration to track and build a case on. Another bonus that P-Noy had going for him was his high popularity ratings.

Recently the P-Noy administration decided to launch another campaign, one that intends to correct the lopsided valuation of taxes, duties and fees that government collects from the private sector. In many cases, the government has really been on the losing end of the deal particularly in the case of cigarettes and mining. Compared to the tax rates imposed by other countries in Asia, it is clear that lobbyists and allies in Congress have successfully protected the interest of the cigarette manufacturers and the mining firms.

So now comes the move on the part of the Department of Finance and Malacanang to rewrite or to “right the un-rightable wrong” by way of executive orders. No less than DENR Secretary Ramon Paje spearheaded the proposal to increase the taxes on mining firms. In the meantime, the DOF under Secretary Cesar Purisima has apparently heeded the advice of international financial bodies as well as the United Nations to raise taxes on cigarettes as a deterrent to grade school or high school age children who may choose to spend their allowance on more important things than cigarettes.

This new move is apparently not going to be a walk in the park for the P-Noy administration. Unlike crooks and criminals, the cigarette and mining reps are not going to run and hide or whimper in compromise. In fact the mining sector has flexed its muscles at their critics, unleashed tons of cash on media and has gone all out by hosting a very publicized event regarding the concerns of the industry. 

While all the media campaigns and forums have been designed or aimed at their critics, it is an indirect message to Malacanang that the mining industry will not take the proposed taxes sitting down. To begin with nobody likes new taxes, everybody is paranoid that if you give government one hand today, it will want your arm next year. Finally, as I have learned from the pharmaceutical industry, the reason why multinationals don’t like such government action is because whatever “new” trends take place in the Philippines could be or will be copied in the region if not around the world.

For example, the “Cheap Medicines Act” of the Philippines has now set an example for other third world countries to copy. Once this happens in the mining industry, the losses of multinational companies in the Philippines will no longer be an isolated case but a regional reality. The last thing multinational mining firms want to see is for the government to pass executive orders that Indonesia, Malaysia, Myanmar etc could copy.

Ironically, because of lobbyists and supporters in Congress, the Philippine government has been prevented from “copying” what Thailand and other neighboring countries have done by way of raising duties and taxes on cigarettes. As it now stands, the Philippine government is the first to be prevented from taking pro-people initiatives in terms of taxes and it is the last to join the club or take advantage of trends in taxation in the region.

So, the P-Noy administration now stands before the doorway to unpopularity and conflict. Does the administration of President Noynoy Aquino have the political will and resolute courage to do what is right; to impose the correct taxes for government or will they fold up and pursue “political correctness”?

This situation is not as simple as making a choice. If P-Noy stands his ground as he always does, the government wins in terms of more revenues, P-Noy’s leadership and popularity rises, and his cabinet secretaries will be more empowered to be proactive in their policy making. The public will admire his commitment to the “Matuwid na daan” vision and the victory will strengthen the image of his administration.

On the other hand, the P-Noy administration could choose to be politically correct on the matter and not pursue the tax reforms. This will placate the mining and cigarette industry. This however will prove to be the hole in P-Noy’s armor. He will have to contend with cabinet members who will effectively be diminished and disgruntled. Even worse, the administration will be committing a very public admission that they don’t have the political will to correct what is blatantly wrong when it involves big business or industry.

So far all I can guess from a distance is that Secretary Ramon Paje and Executive Secretary Jojo Ochoa are playing “Good Cop-Bad Cop” perhaps in an effort to draft an acceptable compromise with the industries concerned. The cigarette lobbyists are expected to once again go to their favorite charities in Congress who in turn will ultimately raise the claim that only Congress has the authority to pass taxes! Ideally compromise is good but it must not be at government’s expense or for the profit of lobbyists and lawmakers.

Judging from the movement on the ground and what I’ve heard about backroom negotiations, it is clear that the players in the mining and cigarette sectors are running scared and somewhat expecting that, if Noynoy Aquino used the DOJ and the BIR against the enemies of the State, chances are he will, if convinced, push through. As they used to say in the game “Let’s Make A Deal”; which door is it going to be: the door of unpopularity? Or the door of compromise?         

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