Organic act

Over the weekend, we were told the MILF and the government peace panel negotiating with them arrived at a substantive agreement on a “framework” for peace in the troubled south.

This does not mean that peace is at hand, however.

The “framework” agreed upon foresees the establishment of a “Bangsa Moro” in areas where Muslim Filipinos are in the majority. The establishment of such a Muslim homeland will be threshed out in legislation. The piece of legislation that emerges, the President tells us, will be submitted to a referendum.

This is where the complications begin. That piece of legislation creating a Bangsa Moro and submitted to the people in a referendum sounds pretty much like an organic act.

This will provoke serious constitutional debate. An organic act is pretty much like a match stick: strike it once and it can never be done again (unless the Constitution itself is amended). We have an organic act already, it is the one that created the ARMM. That organic act executes the promise of autonomy for Muslim Filipinos held forth by the 1987 Constitution.

After that organic act was passed in a plebiscite in the mid-nineties, no other organic act may be superimposed on it (unless, again, we get a new Constitution). It is not clear, from what we have been told about the “framework”, if this is tantamount to a second organic act. It does sound like one, considering it will be submitted to the people for some sort of ratification process and will supplant the ARMM.

We are not sure, as well, how the proposed legislation to execute this new “framework” will look like. If it goes beyond the actually existing settlements and begins recognizing some sort of “ancestral domain”, that will surely be shot down on a constitutional challenge. The precedent will be the adverse ruling of the Corona court a few years ago on the matter of the Memorandum of Agreement on Ancestral Domain (MOA-AD).

Anything that gives preference to historical claims over property rights actually in force will be subject to serious constitutional challenge.

The proposed legislation creating a Bangsa Moro will provoke intense debate and give rise to irreconcilable ideological positions. The other issue with about the same capacity to polarize is the RH bill. That has taken all of 18 years in the legislative mill — and remains there.

I hate sounding a bit tepid about the prospects. In 1995 I had a front row seat when a new era of peace and progress in Muslim Mindanao was proclaimed with the signing of a political settlement between government and the MNLF. That was followed by a failed experiment in autonomy and many years of sporadic fighting.

Tax shock

Daniel Witt, a globally recognized expert on taxation, is president of the International Tax and Investment Center (ITIC). He was here last week as one of the organizers of the 9th Asia Pacific Tax Forum hosted by our Department of Finance.

Interviewed in a televised forum on his views regarding some of the administration’s tax proposal, Witt was not timid in articulating his area of expertise. The ITIC, after all, has done a lot of work for the European Union on the relationship between high tobacco taxes and illicit trade of commodities.

Sometime ago, the ITIC released a report titled “The Illicit Trade in Tobacco Products and How to Tackle It.” That study states “experience shows that radical excise ‘shocks’ are more likely to lead to the emergence or growth of illicit trade.”

On the administration-backed “sin tax” measure now being debated in the Senate, the tax expert cautions about the need for balance. He said: “You need to look at the imbalance — the revenue interest and the health objectives, but with fast-moving goods like distilled spirits, like tobacco, even petrol products in this part of the world, you need to be acutely aware of the risk of illicit trade.”

Witt warns that “if you raise taxes too high and too fast, you’ll create a tax shock…and you will push the legitimate legal market to the illegitimate market and foster illicit trade.” It is, he adds, “critical that governments balance their approach in the setting of excise tax rates with the aim of optimizing tax revenues in the long term and avoiding the development of an illicit market.”

I wonder if Finance Secretary Cesar Purisima was listening to the wisdom of this expert. The DOF wants to effectively raise excise taxes by close to 1,000%. By every definition, that looks like a tax shock that will rattle the markets, raise incentives for smugglers and dislocate demand to the ultimate disadvantage of our tobacco farmers who are ill-prepared to shift to an alternative crop.

The expert view taken by Witt more closely resembles the position of Sen. Juan Ponce Enrile and Sen. Ralph Recto. The two senators have so far stood their ground, refusing to be rushed into passing the radical “sin tax” measure favored by the administration.

Both Enrile and Recto warned, like Witt does, that a steep and irrational spike in excise taxes will produce a flood of smuggled goods. That will kill the domestic industry and dislocate the farmers.

There is little to reassure us either that the authorities will be able to stop smuggling. Today we see rampant smuggling of rice, steel products, plywood, chicken parts and even garlic.

If the authorities are helpless before the flood of smuggled goods devastating what is left of our manufacturing sector, can they stop faster moving commodities like cigarettes and liquor?