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Philippines: Economists bat for full reopening
MANILA, Philippines — The government should start raising funds for its social protection measures and reopen the economy to full capacity to prepare for the worst spillover effects from rising tensions in Ukraine, experts said yesterday.
Economists interviewed by The STAR said the government could no longer afford to widen its budget deficit by distributing a new round of fuel subsidies to public utility vehicle (PUV) drivers hurting from oil price hikes.
De La Salle University economics professor Maria Ella Oplas said the government should instead allow business establishments to resume full operations, saying this will offer additional opportunities to low-income Filipinos.
Oplas warned that inflation, or the average increase in commodity prices, could run away in the coming months as a result of rising fuel prices due to the worsening Ukraine situation. She said the government can prepare workers and their families for this scenario by raising their income through all-out reopening.
By lifting business restrictions, Oplas said economic activities would pick up pace and could even provide jobs to Filipinos repatriated from Ukraine and its neighboring countries. She added that a recovery in mobility would increase the volume of passengers taking PUVs.
“I don’t think the government has financial resources to subsidize gasoline prices anymore and we don’t want the government to borrow again,” Oplas said.
She said that the government can grant fiscal and non-fiscal incentives to encourage business enterprises to hire the same number of workers they had prior to the pandemic.
Ateneo de Manila University economics professor Leonardo Lanzona also called on policymakers to improve social protection for the poor by taxing the wealth of billionaires to raise funds for state interventions.
“Given the huge debt that we already have, it would be time to think about a wealth tax,” Lanzona said.
“In this case, monetary policies should not be modified, and if we are going to have social protection, the only way we can prevent inflation is to institutionalize non-distortionary income taxes,” he said.
Based on a study by non-profit Oxfam, the Philippines can generate as much as $9.2 billion per year by taxing two percent on wealth over $5 million, five percent on wealth beyond $50 million and 10 percent on wealth above $1 billion. A wealth tax proposal filed by progressive lawmakers awaits deliberations in Congress.
However, the Department of Finance has opposed imposing a wealth tax on billionaires on fears it could provoke capital flight and tax avoidance. The agency also expects only P57 billion in additional revenues in enforcing a wealth tax measure.
Source: https://www.philstar.com/business/2022/02/25/2163158/economists-bat-full-reopening