Friday, September 02, 2005

Understanding Nation Building (Part 5)

This post consists of two things--- On Power and an update On Taxation. This is for two reasons--- first we continue on our analysis On Power as discussed by Blueprints on a Viable Philippines. The second reason is we need to update our previous post On Taxation--- because of the Supreme Court decision with regard to the constitutionality of the Extended Value Added Tax Law.

On Power

BLUEPRINT Recommendations: The government will formulate and implement a strategic energy development plan that, as it measurably reduces its dependence on coal, will (1) pursue efficient operation and maintenance of existing thermal power plants and effective energy conservation in the short term; (2) seek technological self-reliance in the design and construction of power-generating plants and other power-related equipment in the medium term; and (3) strive to attain national energy security and self-sufficiency in the long term through the full development and exploitation of the country’s renewable energy resources including geo-thermal energy, solar energy, bio-energy, and wind energy resources as well as nonrenewable energy resources such as petroleum, natural gas, and coal, even as it ensures the protection of the environment in the choice and use of energy.

One of the principal threats to Philippine prosperity is its rising energy cost. It must privatize its power industries and let them best determine the cost-performance of plants. Will building nuclear plants for example be a viable venture? Will Craven's System be a more commercially viable venture? (Craven's uses the difference between ocean temperatures--- the near freazing water at 3,000 ft and the warmer water and air above those levels to harness unlimited energy.) Or something else entirely.

There are areas in the Philippines that do not have power. And there are places even in Luzon, such as Tingloy Island in Batangas where they do not have power for half the day simply because demand can not keep up with supply. Again economics play a huge factor on power and thats how it should be played out so that our people can get power at the right cost.

Development of renewable energy sources should be advocated by government but bottom line, these should also be grounded on practical business and balanced with proper environmental considerations.

On New Taxation

This portion is an update on our previous discussion on taxation. It is now appropriate to discuss the Extended Value Added Tax now that the Supreme Court has determined the constitutionality of that law.

Why, one might add should the Filipino people be burdened with more taxes? What insane justification is there that such thing is the right way to go? Most especially since it too will apply more taxes on oil products which are already considerably high (worldwide) and will in a domino effect raise the cost of living across the board. Without a doubt EVAT will considerably raise inflation in the short term.

First, in the macro way of looking at things, the EVAT is generally a good thing--- it will do much to stem the massive hemorrhaging of our budget deficit and further move the government into the black.

Second, the EVAT sends a positive signal to financial institutions that the government is headed towards fiscal responsibility and is dead serious to control deficit.

These two things maybe likened to a doctor doing surgery--- the patient is dying from massive blood loss and he has to stop the hemorrhaging. It is without a doubt a painful way to cure a patient. But the patient needs to be stabilized. This is the way.

True that the repercussions for the Filipino everyman will be great! He will feel the sting of this new tax. He will be angry. Why does he have to pay for management failures? Inflation will rise and with it, the Filipino family will have to tighten its belt more.

As part of our earlier analysis on what to do with taxation, has the government needs to clean up its tax services, it should likewise look into the possibility of further simplifying the tax system.