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interdependence pre open economies lesson

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Lesson 5 Types of Unemployment and the Natural Rate of Unemployment

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Lesson 5 Types of Unemployment and the Natural Rate of Unemployment

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BSP, monetary policy and Inflation targetting

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BSP, monetary policy and Inflation targetting

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Explains how the NSO calculates the Inflation rate

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Explains how the NSO calculates the Inflation rate

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interesting Article about innovative tax reform

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interesting Article about innovative tax reform

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Real tax reform requires bold and unconventional thinking.

The tax reform proposals currently being bandied about consist largely of modest reductions in both the individual and corporate income tax rates (e.g., from 32 percent to 25 percent) and a raise in the exemption for wage earners (up to, say, P1 million). A bolder, better approach is to just scrap taxes on income altogether and replace these with excise taxes based on the carbon emissions impact of specific goods and services. Simple arithmetic calculations can determine the appropriate carbon tax rates in order to make up for the loss in government revenue as a result of the elimination of income taxes.

Actually, it is inherently unfair to tax people simply because they earn an income. What this effectively does is penalize individuals and businesses for working hard and being successful at producing goods and services that the community wants. It is not consistent with an objective of providing economic incentives and moral encouragement to those who engage in activities that boost the economy and ultimately benefit the nation as a whole. Income taxes are thus inconsistent with the compelling goal of creating jobs for the many millions of unemployed and underemployed citizens.

Taxing carbon is far more logical than taxing income. A tax based on the carbon-emission consequences of the product or service consumed means taxing people based on the pollution they cause. Taxing products or services that cause the emission of carbon dioxide (and other noxious gases) in their production and use is a direct way of making the polluters themselves pay for the cost of cleaning up their mess. Indeed, it would be unfair to let someone dirty everyone's air and then make everyone else bear the cost.

Whatever the government now raises from income taxes can be just as well raised from an appropriate percentage tax based on the amount of carbon one's lifestyle causes to be emitted. In lieu of the government raising money by confiscating part of the income people generate through hard work, the government should raise revenues by penalizing people who pollute a shared environment and cause harm to everybody else. Not just fairness but also economic logic demand this.

A carbon tax means higher taxes on oil products, on products that use petroleum as raw material (like most plastics and synthetics), on coal, on natural gas, and on activities that generate polluting emissions. The tax can take the form of a sales or excise tax. Though there may be vehement objections to such a tax from the public-transport sector, the labor sector, and the consumer sector, it should be borne in mind that taxes on oil and oil-based products, by raising their prices, discourage their consumption and make the clean energy sources that global warming campaigners are trying to promote -like sun, wind and ocean wave-more attractive to the consuming public.

Putting a price on the amount of carbon one emits (or causes to be emitted) will-better than mandated limits and complicated cap-and-trade systems-direct consumers to less carbon-intensive products, and producers to less carbon-intensive methods of production.

A carbon tax is, in effect, a consumption tax. The usual argument against consumption taxes is that these are "regressive" because they penalize low-income groups proportionately more than high-income groups. This objection can be easily overcome by exempting food and other basic commodities-like generic medicine and essential health services-from any consumption taxes. Because low-income earners spend 60-70 percent of their income on food, the nonimposition of taxes on this item alone virtually frees this income segment from sharing any part of the cost of government.

Taxes on consumption-like sales taxes and value-added taxes-effectively penalize individuals and businesses for using up more of the nation's resources. The more one consumes, the more taxes one pays. This makes economic sense since consumption uses up resources that could be used elsewhere, by others, for alternative purposes. A price paid to the community-a tax-for the privilege of consuming more is thus founded on very reasonable grounds. Taxes on consumption logically make those who consume more of society's resources assume a greater share in the cost of managing the society.

Finally, it should not be overlooked that taxes on income-because they prescribe permissible deductions-are more complicated, more subject to the revenue collector's discretion, and therefore more susceptible to corruption. If hard-to-collect income taxes are scrapped altogether and the required government revenue is raised instead through easier-to-collect consumption taxes, a messy, susceptible-to-corruption system will be replaced with a simpler, less corruptible one.

Admittedly, it requires a small sense of adventure to adopt something that isn't being done anywhere else. It can only be hoped that those with the power to make this tax reform proposal happen will be of an innovative mind-set and evaluate this idea solely on its conceptual and practical logic.
Dr. René B. Azurin is a management professor, policy consultant, and author of several books on government and the economy.
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Real tax reform requires bold and unconventional thinking. The tax reform proposals currently being bandied about consist largely of modest reductions in both the individual and corporate income tax rates (e.g., from 32 percent to 25 percent) and a raise in the exemption for wage earners (up to, say, P1 million).

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Economic Indicators for Philippines including actual values, historical data charts, an economic calendar, time-series statistics, business news, long term forecasts and short-term predictions for Philippines economy.

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Trading Economics members can view, download and compare data from nearly 200 countries, including more than 20 million economic indicators, exchange rates, government bond yields, stock indexes and commodity prices.

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Philippines Unemployment Rate | 1994-2018 | Data | Chart | Calendar

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The unemployment rate in the Philippines dropped to 5.3 percent in the first quarter of 2018 from 6.6 percent a year ago. The number of unemployed persons went down by 441 thousand to 2.32 million while the number of employed increased by 2,408 thousand to 41.76 million.

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Philippines GDP Annual Growth Rate | 1982-2018 | Data | Chart | Calendar

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Philippines GDP growth for the fourth quarter of 2017 was revised down to 6.5 percent from an initial estimate of 6.6 percent. Major contributors to the downward revision were Trade and Repair of Motor Vehicles, Motorcycles, Personal and Household Goods, Financial Intermediation, and Other Services.

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If you haven't been paying attention, I don't blame you for at first not believing this. After all, companies go to great lengths to greenwash their image and present themselves as progressive and environmentally responsible, even while they turn your land to deserts and your oceans into dead zones. Unfortunately, as Mark Twain once famously said: "It's easier to fool people than to convince them that they have been fooled."

The truth is that our current system allows pretty much every corporation to externalize both environmental and social costs. In this article, we won't even be touching on social costs. If you don't know what cost externalization is, you can imagine it as making someone else pay part or all of your costs. For example, BP externalized the environmental costs of the Deepwater Horizon disaster by consuming all of the profits but making the government pay for anything beyond the most shoddy and superficial attempts at stopping the crisis.

A new report by Trucost on behalf of The Economics of Ecosystems and Biodiversity (TEEB) program sponsored by United Nations Environmental Program, examined the money earned by the biggest industries on this planet, and then contrasted them with 100 different types of environmental costs. To make this easier, they turned these 100 categories into 6: water use, land use, greenhouse gas emissions, waste pollution, land pollution, and water pollution.

The report found that when you took the externalized costs into effect, essentially NONE of the industries was actually making a profit. The huge profit margins being made by the world's most profitable industries (oil, meat, tobacco, mining, electronics) is being paid for against the future: we are trading long term sustainability for the benefit of shareholders. Sometimes the environmental costs vastly outweighed revenue, meaning that these industries would be constantly losing money had they actually been paying for the ecological damage and strain they were causing.

In terms of land and water use: almost no companies are actually paying a price remotely comparable for what they are actually taking away from the ecosystems. Consider that fact that Nestle pumps water out of drought-ridden California without limits for an unannounced but extremely low price, and turns around and sells this exact same water back to those affected by the resulting droughts for approximate $4 billion profit per year (based on 2012 data).

The even scarier fact in all this is that the indirect costs "downstream" from the industries are actually even greater. Here are the top 5 sectors passing along insane costs:

If you didn't notice yet: meat and coal are probably the largest offenders. If you look at table 2 again, you can see that cattle ranching in South America carries 18 times a higher environmental cost than all the revenue it brings in. Once you think about this, it is probably less surprising that 91% of Amazon rainforest destruction is fueled by increased animal agriculture.

How much money would these companies be losing if they were actually covering the environmental costs or paying to reduce their environmental impact? Well, the report also covers this:

So, now that it has become abundantly clear that our current regulatory system is corrupt/deficient, what do we do about it? Well, firstly we need to stop allowing companies to pretend that they are "environmentally responsible" when they are worse behaved than any child you have ever met. If someone came in and destroyed your kitchen to make you a piece of bread with butter, demanded money for it, and then bragged about being a "responsible cook," it wouldn't be any less ridiculous.

After we have stopped tolerating the bullshit, we need to seek and support actual solutions. We have to be willing to boycott and campaign against "cheap" products that are actually environmentally costly, as well as putting pressure onto governments to amend their regulations. Why should we expect companies to change if neither consumers or governments are forcing them?

To finish up, I will include what the Trucost report suggests for industries, investors, and governments. Please join in helping inform people about this situation, about these costs, and helping create more pressure to remove these "externalities."

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New UN report finds almost no industry profitable if environmental costs were included

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If you haven't been paying attention, I don't blame you for at first not believing this. After all, companies go to great lengths to greenwash their image and present themselves as progressive and environmentally responsible, even while they turn your land to deserts and your oceans into dead zones.