LOCAL GOVERNMENT, THE BUREAUCRACY, TAXES AND WELFARE IN THE PHILIPPINES

LOCAL GOVERNMENT IN THE PHILIPPINES

Administrative divisions consist of regions, provinces, chartered cities, municipalities, and barangays (villages, neighborhoods). Chartered cities are not part of any province and do not elect provincial officials. The Philippines has 17 regions, 80 provinces, 39 chartered cities, 1,496 municipalities, and 42,2027 barangays. Metropolitan Manila, which is regarded as a region, consists of 14 cities, 3 municipalities, and 1,694 barangays. The Autonomous Region in Muslim Mindanao was established in 1990 following a plebicite in late 1989.

Provinces, municipalities, cities, and barangays in Philippines [Type (English), Type (Filipino), Head of Administration, Filipino Title, Number]: 1) Province, Probinsya/Lalawigan, Governor, Gobernador, 80; 2) Municipality, Munisipalidad/Bayan, Mayor, Alkalde, 1,496 City, Siyudad/Lungsod, Mayor, Alkalde, 138; 3) Village, Barangay, Barangay Chairman/Barangay Captain, Punong-Barangay/Kapitan ng Barangay, 42,027. [Source: Wikipedia]

Under reforms passed under Aquino, towns, cities and provinces were given more freedom from Manila and more power to run their own affairs. Over sixty cities have been created by legislation. Cityhood is desirable since cities are funded separately from the provinces so that additional federal money comes into the area. Each province is divided into municipalities. The smallest unit of government is the barangay, which contains up to two hundred dwellings and an elementary school. The barangay captain distributes funds at the local level. [Source: everyculture.com]

Governors and vice governors are elected to head provinces, the largest local administrative unit. Appointed functionaries responsible for managing offices concerned with finance, tax collection, audit, public works, agricultural services, health, and schools are subordinate not just to the governor, but also to national ministries. Because the Philippines is a unitary republic, local government has less power than it would have in a federal system. In fact, according to the constitution, the president oversees local government. The single biggest problem for local government has been inadequate funding. Although local government is permitted to levy taxes, such taxes are subject to restrictions by Congress, and they have been difficult to collect in practice. A fragmented four-province Autonomous Region in Muslim Mindanao was formally established in November 1990 with its own governor and unicameral legislature. [Source: Library of Congress *]

During Marcos's authoritarian years (1972-86), a Ministry of Local Government was instituted to invigorate provincial, municipal, and barangay governments. But, Marcos's real purpose was to establish lines of authority that bypassed provincial governments and ran straight to Malacañang. All local officials were beholden to Marcos, who could appoint or remove any provincial governor or town mayor. Those administrators who delivered the votes Marcos asked for were rewarded with community development funds to spend any way they liked. *

The 80 Provinces: Abra, Agusan del Norte, Agusan del Sur, Aklan, Albay, Antique, Apayao, Aurora, Basilan, Bataan, Batanes, Batangas, Biliran, Benguet, Bohol, Bukidnon, Bulacan, Cagayan, Camarines Norte, Camarines Sur, Camiguin, Capiz, Catanduanes, Cavite, Cebu, Compostela, Davao del Norte, Davao del Sur, Davao Oriental, Dinagat Islands, Eastern Samar, Guimaras, Ifugao, Ilocos Norte, Ilocos Sur, Iloilo, Isabela, Kalinga, Laguna, Lanao del Norte, Lanao del Sur, La Union, Leyte, Maguindanao, Marinduque, Masbate, Mindoro Occidental, Mindoro Oriental, Misamis Occidental, Misamis Oriental, Mountain Province, Negros Occidental, Negros Oriental, North Cotabato, Northern Samar, Nueva Ecija, Nueva Vizcaya, Palawan, Pampanga, Pangasinan, Quezon, Quirino, Rizal, Romblon, Samar, Sarangani, Siquijor, Sorsogon, South Cotabato, Southern Leyte, Sultan Kudarat, Sulu, Surigao del Norte, Surigao del Sur, Tarlac, Tawi-Tawi, Zambales, Zamboanga del Norte, Zamboanga del Sur, Zamboanga Sibugay. [Source: 2012, CIA World Factbook +]

The 39 Chartered cities: Angeles, Antipolo, Bacolod, Baguio, Butuan, Cagayan de Oro, Caloocan, Cebu, Cotabato, Dagupan, Davao, General Santos, Iligan, Iloilo, Lapu-Lapu, Las Pinas, Lucena, Makati, Malabon, Mandaluyong, Mandaue, Manila, Marikina, Muntinlupa, Naga, Navotas, Olongapo, Ormoc, Paranaque, Pasay, Pasig, Puerto Princesa, Quezon, San Juan, Santiago, Tacloban, Taguig, Valenzuela, Zamboanga (2012).

Changes in Local Government After the Marcos Era

The national government in the 1990s sought to upgrade local government by delegating some limited powers to local subdivisions and by encouraging people to participate in community affairs. Local autonomy was balanced, however, against the need to ensure effective political and administrative control from Manila, especially in those areas where communist or Muslim insurgents were active. In practice, provincial governors gained considerable leverage if they could deliver a bloc of votes to presidential or senatorial candidates. Control over provinces generally alternated between two rival aristocratic families. [Source: Library of Congress, 1991 *]

After the People's Power Revolution, the new Aquino government decided to replace all the local officials who had served Marcos. Corazon Aquino delegated this task to her political ally, Aquilino Pimentel. Pimentel named officers in charge of local governments all across the nation. They served until the first local elections were held under the new constitution on January 18, 1988. Local officials elected in 1988 were to serve until June 1992, under the transitory clauses of the new constitution. Thereafter, terms of office were to be three years, with a three-term limit.

The 1987 Constitution retains the three-tiered structure of local government. There were seventy-three provinces in 1991. The province was the largest local administrative unit, headed by the elected governor and aided by a vice governor, also elected. Other officials were appointed to head offices concerned with finance, tax collection, audit, public works, agricultural services, health, and schools. These functionaries were technically subordinate to the governor but also answered to their respective central government ministries. Lower ranking functionaries, appointed by the governor, were on the provincial payroll. *

Chartered cities stood on their own, were not part of any province, did not elect provincial officials, and were not subject to any provincial taxation, but they did have the power to levy their own taxes. As of 1991, there were sixty-one chartered cities headed by a mayor and a vice mayor. The mayor had some discretionary power of local appointment. Municipalities were subordinate to the provinces. In 1991 there were approximately 1,500 municipalities. At the lowest level, with the least autonomy, were barangays, rural villages and urban neighborhoods that were called barrios until 1973. In 1991 there were about 42,000 barangays. *

Various reorganization schemes have been undertaken to invigorate local government. One of the most far-reaching and effective was the creation of a Metro Manila government in the mid-1970s to bring the four cities and thirteen municipalities of the capital region under a single umbrella. Metro Manila is an example of what geographers call the Southeast Asian primate city, a single very large city that is the center of industry, government, education, culture, trade, the media, and finance. No other Philippine city rivaled Manila; all others were in a distinctly lesser league. Continued rapid population growth meant that the boundaries of Metro Manila were expected to expand in the 1990s. *

During martial law, the provinces were grouped into twelve regions, and that arrangement was continued in the Apportionment Ordinance appended to the 1987 Constitution. Because these regions did not have taxing powers or elected officials of their own, however, they were more an administrative convenience for the departments of the national government than a unit of genuine local importance. In 1991 approximately 90 percent of government services were provided by the national government. Attempts by Aquino to decentralize delivery of some services were resisted by members of Congress because such moves deprived them of patronage. *

The single biggest problem for local government has been inadequate funds. Article 10 of the Constitution grants each local government unit the power to create its own sources of revenue and to levy taxes, but this power is "subject to such guidelines and limitations as the Congress may provide." In practice, taxes were very hard to collect, particularly at the local level where officials, who must run for reelection every three years, were concerned about alienating voters. Most local government funding came from Manila. There is a contradiction in the Constitution between local autonomy and accountability to Manila. The Constitution mandates that the state "shall ensure the autonomy of local governments," but it also says that the president "shall exercise general supervision over local governments." The contradiction was usually resolved in favor of the center. *

Barangay

A barangay, formerly called barrio, is the smallest administrative division in the Philippines and is the native Filipino term for a village, district or ward. In colloquial usage, the term often refers to an inner city neighbourhood, a suburb or a suburban neighborhood. The word barangay originated from balangay, a kind of boat used by a group of Austronesian peoples when they migrated to the Philippines. Municipalities and cities are composed of barangays, and they may be further subdivided into smaller areas called purok (zones), and sitio, which is a territorial enclave inside a barangay, especially in rural areas. As of September 30, 2012, there were a total of 42,028 barangays throughout the Philippines. [Source: Wikipedia +]

The original “barangays” were coastal settlements of Malayo-Polynesian people who came to the Philippines archipelago from other places in Southeast Asia. Most of the ancient barangays were coastal or riverine in nature as most of these early settlers relied on fishing for protein and income. They also traveled mostly by water up and down rivers, and along the coasts. Trails always followed river systems, which were also a major source of water for bathing, washing, and drinking.

The modern barangay is headed by elected officials, the topmost being the Punong Barangay (addressed as Kapitan; also known as the Barangay Captain). The Kapitan is aided by the Sangguniang Barangay (Barangay Council) whose members, called Barangay Kagawad ("Councilors"), are also elected. The council is considered to be a Local Government Unit (LGU), similar to the Provincial and the Municipal Government. The officials that make up the council are the Punong Barangay, seven Barangay Councilors, and the chairman of Youth Council or Sangguniang Kabataan (SK). Thus, there are eight (8) members of the Legislative Council in a barangay. +

The Barangay Justice System or Katarungang Pambarangay is composed of members commonly known as "Lupon Tagapamayapa" (Justice of the peace). Their function is to conciliate and mediate disputes at the Barangay level so as to avoid legal action and relieve the courts of docket congestion. Barangay elections are non-partisan and are typically hotly contested. Barangay Captain are elected by first-past-the-post plurality (no runoff voting). Councilors are elected by plurality-at-large voting with the entire barangay as a single at-large district. Each voter can vote up to seven candidates for councilor, with the winners being the seven candidates with the most number of votes. Typically, a ticket usually consists of one candidate for Barangay Captain and seven candidates for the Councilors. Elections for the post of Punong Barangay and barangay kagawads are usually held every three years starting from 2007. +

The barangay is often governed from its seat of local government, the barangay hall. A tanod, or barangay police officer, is an unarmed watchman who fulfills policing functions within the barangay. The number of barangay tanods differ from one barangay to another; they help maintain law and order in the neighborhoods throughout the Philippines. Funding for the barangay comes from their share of the Internal Revenue Allotment (IRA) with a portion of the allotment set aside for the Sangguniang Kabataan. The exact amount of money is determined by a formula combining the barangay's population and land area.

There exists a union of barangays in the Philippines: the Liga ng mga Barangay (English: League of Barangays), more commonly referred to by its previous name, the Association of Barangay Captains (ABC). Representing all 41,995 barangays, it is the largest grassroots organization in the Philippines.

The term "barangay" may also colloquially refer to a large group of people. An example is Barangay Ginebra, the name of supporters of the Ginebra San Miguel basketball team. In 1999, the team was renamed Barangay Ginebra Kings in homage to its fans.

History of Barangay

When the first Spaniards arrived in the Philippines in the 16th century, they found well-organized independent villages called barangays. The name barangay originated from balangay, a Malay word meaning "sailboat". The first barangays started as relatively small communities of around 50 to 100 families. By the time of contact with Spaniards, many barangays have developed into large communities. The encomienda of 1604 shows that many affluent and powerful coastal barangays in Sulu, Butuan, Panay, Leyte and Cebu, Pampanga, Pangasinan, Pasig, Laguna, and Cagayan River were flourishing trading centers. Some of these barangays had large populations. In Panay, some barangays had 20,000 inhabitants; in Leyte (Baybay), 15,000 inhabitants; in Cebu, 3,500 residents; in Vitis (Pampanga), 7,000 inhabitants; Pangasinan, 4,000 residents. There were smaller barangays with less number of people. But these were generally inland communities; or if they were coastal, they were not located in areas which were good for business pursuits. These smaller barangays had around thirty to one hundred houses only, and the population varies from one hundred to five hundred persons. According to Legazpi, he found communities with twenty to thirty people only. [Source: Wikipedia]

The coastal barangays were more accessible to trade with foreigners. These were ideal places for economic activity to develop. Business with traders from other Countries also meant contact with other cultures and civilizations, such as those of Japan, Han Chinese, Indian people, and Arab people. These coastal communities acquired more cosmopolitan cultures, with developed social structures (sovereign principalities), ruled by established royalties and nobilities.

During the Spanish rule, smaller barangays were combined to form towns. Each barangay was headed by the cabeza de barangay (barangay chief), who formed part of the Principalía - the elite ruling class of the municipalities of the Spanish Philippines. This position was inherited from the first datus, and came to be known as such during the Spanish regime. The Spanish Monarch ruled each barangay through the Cabeza, who also collected taxes (called tribute) from the residents for the Spanish Crown.

When the Americans arrived, "slight changes in the structure of local government was effected". Latter, Rural Councils with four councillors were created to assist now renamed Barrio Lieutenant; it was later renamed Barrio Council, and then Barangay Council. The Spanish term barrio (abbv. "Bo.") was used for much of the 20th century until President Ferdinand Marcos ordered their renaming to barangays in the 1970s. The name survived the 1986 EDSA Revolution, though older people would still use the term barrio. The Municipal Council was abolished upon transfer of powers to the barangay system. Marcos used to call the barangay part of Philippine participatory democracy, and most of his writings involving the New Society praised the role of baranganic democracy in nation-building. After the 1986 EDSA Revolution and the drafting of the 1987 Constitution, the Municipal Council was restored, making the barangay the smallest unit of Philippine government.

Regional Autonomy in the Philippines

By the 1990s, Philippine nationalism had not fully penetrated two regions of the country inhabited by national minorities: the Muslim parts of Mindanao and the tribal highlands of northern Luzon. Some Muslims and hill tribespeople did not consider themselves Filipinos, although they were citizens. Muslim separatism has a very long history. The Spaniards, Americans, and Japanese all had difficulty integrating the fiercely independent Moros into the national polity, and independent governments in Manila since 1946 have fared little better. The Moro insurgency has waxed and waned but never gone away. Enough Muslims participated in the 1987 elections to elect two of the twenty-four senators, but continuing land disputes were major factors preventing reconciliation between Christians and Muslims in Mindanao. The grievances of tribal groups, such as the Ifugao and Igorot, in northern Luzon were of more recent origin, having been stoked by ill-considered Marcos administration dam-building schemes that entailed flooding valleys in the northern Luzon cordillera where the tribal groups lived. When Aquino came to power, she was confronted with a Moro National Liberation Front demand for separation from the Philippines, and a Cordillera People's Liberation Army allied with the New People's Army. Aquino boldly negotiated a cease-fire with the Moro National Liberation Front, and her constitutional commissioners provided for the creation of autonomous regions in Muslim parts of Mindanao and tribal regions of northern Luzon. [Source: Library of Congress, 1991*]

Article 10 of the Constitution directed Congress to pass within eighteen months organic acts creating autonomous regions, providing that those regions would be composed only of provinces, cities, and geographic areas voting to be included in an autonomous region. Congress passed a bill establishing the Autonomous Region in Muslim Mindanao with Cotabato City designated as the seat of government, and Aquino signed it into law on August 1, 1989. The required plebiscite was set for November 19, 1989, in thirteen provinces in Mindanao and the island groups stretching toward Borneo. The plebiscite campaign was marred by violence, including bombings and attacks by rebels. Aquino flew to Cotabato on November 6, 1990, to formally inaugurate the Autonomous Region in Muslim Mindanao. She had already signed executive orders devolving to the Autonomous Region in Muslim Mindanao the powers of seven cabinet departments: local government; labor and employment; science and technology; public works and highways; social welfare and development; <>tourism; and environment and natural resources. Control of national security, foreign relations, and other significant matters remained with the national government. Because many of the provinces to be included actually had Christian majorities, and because the Moro National Liberation Front, dissatisfied with what it perceived to be the limitations of the new law, urged a boycott, only four provinces (Tawitawi, Sulu, Maguindanao, and Lanao del Sur) elected to join the Autonomous Region in Muslim Mindanao. Cotabato City itself voted not to join. So, a new capital had to be identified. In 1991 Maranaos, Maguindanaos, and Tausugs were disputing where the capital should be. Indications were that the government of the autonomous region would not have supervisory power over local government officials. *

Congress passed a similar law creating a Cordillera Autonomous Region, but in a referendum held in five provinces (Abra, Benguet, Mountain, Kalinga-Apayao, and Ifugao) on January 29, 1990, autonomy failed in all provinces except Ifugao. The reasons for rejection were thought to be fear of the unknown and campaigning for a no vote by mining companies that feared higher taxation. In 1991 the Supreme Court voided the Cordillera Autonomous Region, saying that Congress never intended that a single province could constitute an autonomous region. *

Bureaucracy in the Philippines

The Philippines bureaucracy is modeled after the American civil service. In 1991 the president's cabinet consisted of the executive secretary (who controlled the flow of paper and visitors reaching the president), the press secretary, the cabinet secretary, and the national security adviser, and the secretaries of the following departments: agrarian reform; agriculture; budget and management; economic planning; education, culture, and sports; environment and natural resources; finance; foreign affairs; health; interior and local governments; justice; labor and employment; national defense; public works and highways; science and technology; social welfare and development; <>tourism; trade and industry; and transportation and communications. Cabinet members directed a vast bureaucracy--2.6 million Filipinos were on the government payroll in 1988. [Source: Library of Congress, 1991 *]

The bureaucracy in the late 1980s was overseen by a constitutionally independent Civil Service Commission, the members of which were appointed by the president to a single nonrenewable term of seven years. Because the Constitution prohibits defeated political candidates from becoming civil servants, bureaucratic positions cannot be used as consolation prizes. *

Two problems, in particular, have plagued the civil service: corruption (especially in the Bureau of Customs and the Bureau of Internal Revenue) and the natural tendency, in the absence of a forceful chief executive, of cabinet secretaries to run their departments as independent fiefdoms. Bribes, payoffs, and shakedowns characterized Philippine government and society at all levels. The Philippine Chamber of Commerce and Industry estimated in 1988 that one-third of the annual national budget was lost to corruption. Corruption also occurred because of cultural values. The Filipino bureaucrat who did not help a friend or relative in need was regarded as lacking a sense of utang na loob, or repayment of debts. Many Filipinos recognize this old-fashioned value as being detrimental to economic development. A 1988 congressional study concluded that because of their "personalistic world view," Filipinos were "uncomfortable with bureaucracy, with rules and regulations, and with standard procedures, all of which tend to be impersonal." When faced with such rules they often "ignore them or ask for exceptions."

See Corruption

Taxes in the Philippines

The Philippines has a problem collecting taxes. The inability to collect taxes has hurt the economy for decades. Tax revenues are only 14.3 percent of GNP. In Southeast Asia only Cambodia and Laos gave lower figures. In 2003, only $1.6 billion in income tax was collected from 2 million people, in a country with 86.5 million people. Taxes and other revenues: 14.3 percent of GDP (2013 est.)m country comparison to the world: 196.

In an effort to tackle the Philippines deficit problem President Arroyo announced plans in the early 2000s to: 1) increase taxes on petroleum products, alcohol and cigarettes; 2) replace taxes on net profits with ones on gross income; and 3) replace the widely abused value-added tax. Corporate tax rate in the Philippines: 30 percent, compared to 17 percent in Singapore and 35.6 percent in Japan.

The Aquino government formulated a tax reform program in 1986 that contained some thirty new measures. Most export taxes were eliminated; income taxes were simplified and made more progressive; the investment incentives system was revised; luxury taxes were imposed; and, beginning in 1988, a variety of sales taxes were replaced by a 10 percent value-added tax--the central feature of the administration's tax reform effort. Some administrative improvements also were made. The changes, however, did not effect an appreciable rise in the tax revenue as a proportion of GNP. [Source: Library of Congress, 1991 *]

Problems with the Philippine tax system appear to have more to do with collections than with the rates. Estimates of individual income tax compliance in the late 1980s ranged between 13 and 27 percent. Assessments of the magnitude of tax evasion by corporate income tax payers in 1984 and 1985 varied from as low as P1.7 billion to as high as P13 billion. The latter figure was based on the fact that only 38 percent of registered firms in the country actually filed a tax return in 1985. Although collections in 1989 were P10.1 billion, a 70 percent increase over 1988, they remained P1.4 billion below expectations. Tax evasion was compounded by mismanagement and corruption. A 1987 government study determined that 25 percent of the national budget was lost to graft and corruption. *

Low collection rates also reinforced the regressive structure of the tax system. The World Bank calculated that effective tax rates (taxes paid as a proportion of income) of low-income families were about 50 percent greater than those of high-income families in the mid-1980s. Middle-income families paid the largest percentage. This situation was caused in part by the government's heavy reliance on indirect taxes. Individual income taxes accounted for only 8.9 percent of tax collections in 1989, and corporate income taxes were only 18.5 percent. Taxes on goods and services and duties on international transactions made up 70 percent of tax revenue in 1989, about the same as in 1960. *

Benigno Acquino III’s Effort to Collect Taxes

Blaine Harden wrote in Washington Post: “As for what he will do as president, Aquino said a priority would be tax collection. Economists here estimate that tax evasion deprives the government of about a third of its annual operating budget. "We already have a list of people we will be investigating for tax avoidance," Aquino said, adding that he is prepared to send "people to jail on a fast-track basis." [Source: Blaine Harden, Washington Post, May 7, 2010 */*]

“A potential hiccup in the tax-enforcement scheme is Aquino's blue-blood background. He comes from one of the country's most prominent landowning families. His campaign supporters include families that have dominated the economy of the Philippines for centuries. Economist here say many of these families have gotten away with egregious tax fraud for decades, while pushing the legislature to grant them tax exemptions. */*

"How beholden am I?" Aquino said, when asked about possible conflicts with moneyed supporters. "Each time I talk to one of the groups, I tell them, `You will have a level playing field.' Our obligation is to develop the entire economy, not just to develop certain key players." */*

Government Budget in the Philippines

Budget: revenues: $38.88 billion, expenditures: $43.89 billion (2013 est.). Taxes and other revenues: 14.3 percent of GDP (2013 est.), country comparison to the world: 196. Budget surplus (+) or deficit (-): -1.8 percent of GDP (2013 est.), country comparison to the world: 81. Public debt: 50.2 percent of GDP (2013 est.), country comparison to the world: 68, 51.5 percent of GDP (2012 est.). The data in debt cover debt issued by the national government, and excludes debt instruments issued by government entities other than the treasury; the data include treasury debt held by foreign entities; the data exclude debt issued by social security institutions, government-owned and controlled corporations, the Central Bank, and local government units. [Source: CIA World Factbook]

The budget has shown a deficit every year since 1998, but trends in the early twenty-first century are encouraging. In 2004 the deficit was US$3.4 billion, or about 3.9 percent of gross domestic product (GDP), conforming to the government’s increasingly stringent targets for the second consecutive year. During 2005, the government expected to begin to close the revenue gap by introducing an expanded value-added tax. However, the tax’s introduction was delayed pending resolution of a dispute over its constitutionality, which came on October 18 in a ruling by the Supreme Court. Historically, the persistent budget deficit, the result of overspending and poor collection by the Bureau of Internal Revenue, has placed restraints on economic growth. [Source: Library of Congress, 2006]

Tax Evasion in the Philippines and Efforts to Combat It

Tax evasion has been described as a national pastime. The government loses lots of revenues to tax dodgers and smugglers. Corporations and the rich are particularly negligent in paying up their fair share of taxes. The Philippines tax authority, the Bureau of Internal Revenue, is regarded as perhaps the most corrupt body in the government. It employees often seem to be more interested in colluding with tax dodgers than trying to get their money. In the early 2000s, the bureau had such a bad reputation that there was some discussion of dismantling it completely and building up a new tax collection bureau from scratch.

In the early 2000s, Finance Secretary under Arroyo, Armindo Romulo led a campaign against corruption, tax evasion and fraud by wealthy families and big corporations. He told Businessweek, “Teachers, policemen and soldiers pay their taxes. The big boys should pay theirs.” Rosimo was shot in the head and killed outside his home in October 2003. Two months earlier a senior tax official was killed in the central Philippines.

Arroyo began her second term with a campaign against tax evasion. The Supreme Court revived a failed tax evasion suit against billionaire Lucio Tan, who reportedly owed more than $1 billion in back taxes and monitored the lifestyle habits of employees of the Bureau of Internal Revenue. One lawyer who amassed $375,000 in assets on a salary of $2,000 a year was fired.

An effort to dismiss and reform local tax officials largely failed. The government had more success implementing a new computer based system that replaced the old way of doing things by hand. In 2003, $1.3 billion in underpayments was discovered.

Improved Tax Collection Helps the Philippine Economy

Michelle V. Remo wrote in the Philippine Daily Inquirer, “Rising tax collection also helped in keeping the budget deficit within manageable levels, the DOF said. The Bureau of Internal Revenue, an attached agency of the DOF, has been tasked to implement administrative and legal measures to boost tax collection. The BIR has been filing tax evasion cases every two weeks in an effort to discourage taxpayers from underdeclaring their incomes. Earlier this year, the BIR also issued various tax regulations to plug loopholes in existing tax laws. One example is the regulation requiring hospitals, health maintenance organizations, and clinics to withhold taxes of doctors and medical practitioners. The regulation is seen to address tax evasion among medical practitioners, which the BIR suspected to be rampant. Another example is a regulation stating the tax obligations of operators of privilege stores, or “tiangges,” to enforce tax compliance. [Source: Michelle V. Remo, Philippine Daily Inquirer, November 22, 2013 \^\]

“In raising the country’s investment rating, the credit agencies cited the government’s favorable fiscal position. The agencies also noted the country’s benign inflation, stable banking system, rise in foreign exchange reserves, and robust economic growth driven by strong domestic demand. Last year, the BIR for the first time hit the P1-trillion mark in annual tax collection, generating P1.06 trillion. This year, the BIR expects to post at least 10-percent growth in tax collection. Also, the DOF tasked the tax bureau to breach the P2-trillion mark in annual tax collection by 2015, a goal revenue officials said was achievable. The assignment of the higher collection goal was meant to reduce foregone revenue for the government—estimated at P450 billion a year, according to the World Bank—due to tax evasion. \^\

Welfare and NGOs in the Philippines

The Philippines’ social security system was established in 1957 and is compulsory for all employees, public and private. Retirement is compulsory at age 65 but optional at 60. An employees’ compensation program, added in 1975, pays double compensation for work-related death, injury, or illness to employees who are not self-employed. The Philippine Health Insurance Corporation was established in 1995 to administer the National Health Insurance Program, with the stated goal of providing universal coverage. Annual premiums are about US$22. Retirees who have reached the age of 65, or who are older than 60 but not yet 65 and have already paid 120 monthly premiums, pay nothing. Depending on their level of income, heads of poorer households may pay the annual premium and have it include three other family members, as well as themselves. Indigents may have their entire premiums paid in part by the national government and in part by their local government. Benefits do not necessarily cover the full costs of medical expenses, and many poor people still cannot afford to pay the difference.

Governmental organizations provide health clinics and medical services, aid in establishing micro businesses such as craft shops and small factories, and offer basic services for the disabled. The number of beggars increases in times of high unemployment. People consider it good luck to give money to a poor person, and so beggars manage to survive. Volunteer agencies from the United States, the United Kingdom, the Netherlands, Germany, Denmark and Japan work with NGOs and governmental agencies. Projects to help children and meet environmental needs are the focus of volunteer efforts. Volunteer agencies are supervised by the Philippine National Volunteer Service Coordinating Agency. [Source: everyculture.com]

According to everyculture.com: While nongovernmental organizations (NGOs) work throughout the country to solve social problems, they are most visible in metropolitan Manila, where they work with squatters. The rural poor gravitate to urban areas, cannot find a place to live, and settle in public areas, riverbanks and garbage dumps. It is estimated that one of every four residents of metropolitan Manila is a squatter. Shanty towns are so large that in 2000, when rains from two successive typhoons made garbage dumps collapse, over two hundred people were buried alive as their homes were swept away. Nongovernmental organizations exert pressure on the government for land on which squatters can build permanent housing. Forced evictions are another target of NGOs, since an alternative place to live is not provided. [Ibid]

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© 2008 Jeffrey Hays

Last updated June 2015

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