Wednesday, July 2, 2008

Time to scrap VAT

Time to scrap VAT

First hand reports have reached this writer that the people of Kalibo and Iloilo are still mired in waist deep mud. They go to office or school in short pants and rubber slippers. Many families from the same cities still live on the roof tops of their former homes, there is still no electricity and clean water there. Please give freely to our neighbours who are suffering in Panay Island. They need our help badly and time might come when we will need their help too.

Government, non-government, and church groups have been flying food, water, and blankets to the poor victims of typhoon Frank in Panay Island. But there is very little help for the middle class families who have been afflicted by the same. These people need our help too. Some of my friends and acquaintances who are professionals who work or have their families and homes in Iloilo and Kalibo have lost their houses to tremendous mud slides. A colleague had to take a leave of absence from his work here in Bacolod so he can go and try to salvage whatever he can from his house which is covered in six feet of mud. As the only man of the house his job is to shovel the filth and mud from his home. Meanwhile his family sleeps and cooks meals on their roof top. They cover themselves with plastic sheets from the rain. When this man asked for assistance for his family he was told that he had to fend for his family and himself because the priority of the government relief agencies is to help those who are poor. Because he had a job he didn’t qualify. We can hardly blame the government and other relief agencies for their preferential option for the poor. We really should prioritize help for those who are indeed helpless. But what about the office where the man above mentioned is working? Don’t they have mechanisms to help their employees who are in need?

Meanwhile the cost of diesel fuel has risen to 60 pesos per litter and that is just so that the oil firms won’t loose too much of their expected profits for the month of June. The economic crisis will continue to worsen and all ready the middle class is starting to feel the pinch. Many professionals, including myself, have been reduced to near poverty and have been living from one pay check to the next. Their savings are all gone after paying for tuition fees, textbooks, school uniforms, and the like. Economists predict that more and more of the middle class will likely join the ranks of the poor this year. That statement is actually almost fallacious as it is merely stating what is already obvious to the people.

And what is the government doing to abate this economic crisis. Well aside from spending millions of pesos at a junket to the US the government is also giving 500 peso dole outs to the poor. They have extra money you see taken from the value added tax that the government imposes on any transaction or sale. Vat, for those who don’t know it yet is 12% of the cost of produce or service. But what can a dole out of 500 peso actually do for those who received it? The money was supposed to go to the paying of their electricity bill. That would partially pay for one month worth of electricity. But what about next month’s bill? Most likely the 500 peso government dole out went to the buying of food for the week. What happens when the food runs out? This is the problem with dole outs. It is simply unsustainable and causes more problems in the end.

The government is giving out dole outs left and right to avert a possible rebellion amidst and because of the economic crisis. People become violent you see when they become hungry. But what would happen when they actually run out money to give as dole outs. The government can’t continue to subsidize the price of NFA rice and give 500 peso dole outs forever. And when the poor won’t receive these dole outs then there will be hell to pay.

It’s time to scrap the VAT. The government is mismanaging the extra income it makes from VAT anyway. It would help our people from all classes if VAT is scrapped. The cost of living and the prices of food and services would go down tremendously and almost immediately. This would go a long way to diffuse a hard and worsening condition. It may also prevent rioting and violent protests on the streets. It might just save Madame’s neck. But will she do that to ease the financial woes of the Filipino? Probably not, she is too much of a liberal economist who believes in everything that the WTO tells us and is more concerned with what foreign investors say about her than to heed the calls of her own people. We face bleak and bleaker times.

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