Tax justice to deliver
essential public services,
not PPPs!
Asian Peoples Movement on Debt & Development
Philippines, social service gaps
Health costs are still largely out-of-pocket (up to
57%)
More than 50% of public hospitals characterized
as no more than “infirmaries” (2009)
Around 1 hospital bed per 1,000 population
against the World Health Organization standard
of 20
Maternal mortality rate at 163 per 100,000
population, missing the MDG target of 52.
Education
Continuous decline in the education budget
from a high of about 30% of the national
budget in the 50s to only around 15%
(2013).
Education spending from the post-Marcos
years up to the present is yet to reach the
6% of GNP UNESCO Delors standard
Government Spending for 2015
In Billion PhP
900
800
700
600
500
400
300
200
100
0
763.249
450.207
Source: 2015 Budget of Expenditures and
Sources of Financing cited in (Freedom from
Debt Coalition)
261.37
109.273
103.147
23.642
4.396
Public-Private Partnerships as a “solution”
to inadequate resources for public service
provision
Offered to investors:
 Financing thru direct government appropriations and
ODA funds
 Guaranteed return of investments
 Use of public sector assets by investors to pay capital
costs, debt services and operating expenses
 Inflation and foreign exchange cover provided by
government (through price escalation clauses)
Water privatization, Metro Manila
International Finance Corporation – drafted
the water privatization plan for the
Metropolitan Waterworks and Sewerage
System (MWSS)
1995: Turnover of MWSS' service
operations to two private concessionaires
Hailed by the World Bank as the largest
water privatization undertaking in Asia
ADB: “role model for future large-scale
projects in the Asia- Pacific Region”.
Promises made
Lowering of water rates
Uninterrupted water supply
Compliance with WHO standards within 5
years
100% water service coverage within 10 years
US$7.5 billion in investments for new
infrastructure
US$4 billion in corporate and income tax
revenues over 25 years
Promises broken
 Non-payment of concession fees – at least $36.9 M
still owed to MWSS
 Thus the need for government bridge financing of
maturing obligations of MWSS amounting to more than
$400 million in loans to avoid a default
 $3.1 B corporate income taxes of MetroManila’s water
concessionaires shouldered by consumers since 2008
 Below national drinking water standards
 Rising water rates – now in the top five highest
average water tariffs among major Asia-Pacific cities
 Unmet expansion targets (especially in urban poor
communities)
Energy
State’s private sector participation contracts
with Independent Power Producers contained:
 “Take-or-pay” provisions –regardless of capacity
needed or produced
 Fuel cost guarantee
 Absorption of exchange rate fluctuations
Resulted in more borrowings of $600 M from
ADB & JBIC
The Philippines’ electricity rates counts among
the top five highest residential tariffs in Asia
PPPs as “main engine for national
development” – Aquino administration
(Medium-term Philippine Development Plan, 2011-2016)
 Income Tax Holiday of 4 – 6 years
 Additional deductions for labor expenseS
 Tax and duty exemption on imported capital equipment
 Tax credit on domestic capital equipment
 Tax credit for taxes and duties on raw materials
 Exemption from taxes and duties on imported spare parts
 Exemption from wharfage dues and any export tax, duty,
impost & fees
 “Regulatory guarantees” - guaranteed payments and
adjustments if court orders, regulatory agencies, or even
legislation affect business profits
Illicit Financial Flows,
Philippines (2003-2012)
PPPs are
rationalized by
inadequate
resources…
(In millions of US dollars, nominal)
(Kar and Spanjers, Illicit Financial Flows
from Developing Countries:
2003-2012)
Yet resources are
draining away,
largely from the tax
dodging practices of
multinational
companies
Year
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Cumulative
Average
Amount
8,255
9,214
13,488
10,001
7,982
6,899
8,650
8,871
10,965
9,157
93,494
9,348
Revenues are lost as well in
incentives to MNCs
At least 1.5% of GDP or PhP144 billion
– estimated revenue loss due to income
tax holidays, and lower income tax
rates and duties.
Translating to
9.3% of government expenditures
10.6% of government revenues
(Department of Finance, 2011)
TAX JUSTICE!
Not PPPs or any other form of privatization of
essential services, nor dependence
on aid and debt
 To raise revenues for the state to fulfil its obligations, which
include delivery of adequate, affordable, quality essential
social services. Its ability to meet these obligations is
affected by its capacity to raise revenues.
 For the state to effectively and efficiently enforce tax
policies that are just and progressive along with other
programs and policies that strengthen the domestic
economy and the country’s internal capacity to provide for
its own finance needs.
 So South governments are able to move away from
resorting to borrowings and depending on aid.