The government should implement practical economic measures

There is a public uproar over the huge imbalance in the 2025 national budget after politicians removed vital appropriations and allocations for educational, health, and social services to squeeze in for themselves and the disguised pork barrel Ayuda sa Kapos ang Kita Program, a form of ayuda to the poor sectors. The Commission on Elections has issued the usual but largely unheeded warnings of disqualification for violators.

We have to be realistic that this is nothing new in the presidential and patronage type of government that we have, which has embedded corruption in our fiscal and budget systems. All we see each year are the smoking guns, the Commission on Audit’s litany of audit findings of anomalies in almost all departments and offices in government.

A reality check for us is that the country relies substantially on the domestic economy, which in turn relies heavily on government spending. Almost all registered corporations in the country are in domestic business and they contribute an estimated 40 percent of revenues and taxes to the government.

Consumer spending, therefore, is the lifeblood that moves the country’s economy. You can see everywhere in the metropolis that more people are plying all kinds of ware to sell and cope with the challenge to feed and sustain their families.

Now is the time for the country’s leaders to focus on our strengths and resources as a nation. We have able manpower resources and undeveloped agricultural and mineral lands, while other countries, which are more economically progressive, are losing theirs.

Singapore, for instance, with six million people and one of the highest gross domestic product per capita in the region, relies on importing most of their food and fresh water requirements, having no land and sea resources anywhere. Other countries are losing their agricultural land to urban development. We can produce a number of farm products from our vast land and sea resources, which are not only enough to feed our population but can be exported. Importation has become a convenient escape from nonperformance in agriculture.

Our tax system should also be simplified to a direct final tax on revenues based on registered sales/revenue invoices and documents. Tax should not be imposed on reserved and undistributed profits of corporations but on actual dividends paid out. The undistributed profits will increase the opportunities for a company to expand its business and hire more workers.

Direct final taxes can be collected on recipients of cash dividends. Some first-world economies, like Estonia, are successfully doing this practical tax system. Direct final tax will at least double the collections of the Bureau of Internal Revenue (BIR). A 5-percent off the top from sales or revenues will be a welcome alternative to the vexatious and costlier tax filings on monthly and quarterly periods. Net taxable income is usually 10 percent (after deducting all the operating expenses) and would generate for the government the equivalent of only 2.5 percent of gross revenues.