Archive for the ‘GMA’ Category

President Benigno Aquino III delivering his SONA before the joint session of Congress

President Benigno Aquino III delivering his SONA before the joint session of Congress


Yesterday was another State of Nation Address (SONA) day in the Philippines.

The SONA is supposed to be a report of the country’s chief executive on his government’s accomplishments over the past year as well as his plans for the future. In the case of the incumbent, President Benigno S. Aquino III, his plans for the remaining two years of his term.

Sadly, the SONA had been transformed into something less than that.


Philippine Congress hears President Aquino's SONA

Philippine Congress hears President Aquino’s SONA


For one, the exercise has become a fashion spectacle, an obscene, ostentatious and insensitive display of wealth, pomp, and bad taste in the midst of hunger and poverty.  You have the people’s representatives and servants trying to outdo each other on the red carpet.

Second, it became a game of up-onemanship, a very swell pissing contest. A president will list his accomplishments and declare he did more than his predecessors.  Or all other previous administrations combined, for that matter. What should he do that?  Does he have to do that?  Under the 1987 Constitution, he is limited to a single term.  He is not eligible to run for re-election. Why behave like a candidate on the hustings?  Why can’t he locate himself in a continuing narrative of nation-building even if one president supposedly accomplished more than others?

Why can’t a president talk and report to the nation as the President of all Filipinos and not as leader of his party?


After all, the members of the opposition are fellow Filipinos, fellow citizens, and thus also his constituents.


Can a reform of our winner-take-all electoral possibly remedy this parochialism and short-sightedness?  How about electing the president and the vice president as a single package, similar to what they do in the United States, to enhance unity at the very top of the country’s political leadership?

In the post-Marcos period, all chief executives have been put on the defensive sometime during their presidency and it has limited their effectivity.  For some reason or the other, they sustain a significant dimunition of their political capital and suffer the consequences.


Even the saint-like Tita Cory saw a decrease of her political stock as her administration was unable to solve a power crisis (the same problem confronting his son at the moment).  Only her clear intent not to succeed herself after 1992 prevented a further decrease in her political capital.


President Fidel V. Ramos developed a reputation of being a doer fortified by complete staff work (CSW) by his able lieutenants.  He is the only post-Marcos president with a grand plan for the country (Philippines 2000) as well as the first one to plan to succeed himself. Thus the deliberate use of the year 2000 in the fighting slogan “Philippines 2000” even if his presidential term was supposed to end in June 1998.


Ramos’ image first took a hit with the execution of Flor Contemplacion, a Filipino domestic, in Singapore on murder charges.  Most Filipinos believed she was innocent of the crime, that she was wrongly accused and put to death, and that the Philippine government acquiesced to the Singapore government’s judgement and did not do much to help her escape death.


Ramos’s bid to succeed himself through PIRMA was foiled by the opposition of erstwhile allies led by Jaime Cardinal Sin and Tita Cory.  What finally did him was the Asian financial crisis of 1997-98. 
While President Joseph “Erap” Estrada was elected in 1998 by the single largest number of voters in the country’s political history, his downfall was swift.  As early as 2000, he faced accusations of grand corruption and tried to parry his political opponents by launching a war against the Moro Islamic Liberation Front (MILF) in Mindanao. Eventually, he was impeached and removed by another people power insurrection in January 2001, after only two years and seven months in power.

As vice president, Gloria Macapagal Arroyo (GMA) assumed the office and served the remainder of President Estrada’s term.  The constitutional restrictions of a single term did not apply to her and she successfully stood for election as president in May 2004.  Following the 2005 revelation of her taped conversations with a top Commission on Elections (COMELEC) official suggesting that the count be tampered in her favor, GMA was put on the so-called “survival mode”.  She was hounded by corruption charges during the remainder of her term, largely because of the unsavory reputation of her husband, the First Gentleman Mike Arroyo.

This time around, President Noynoy Aquino has to deal with a Supreme Court decision that declared his Disbursement Acceleration Program (DAP) (or budget impounding schemes, as other would have it) unconstitutional. His popularity rating plummeted and he faces impechment complaints–an entirely new situation for him.  He chose to go on an offensive short of calling the Supreme Court as the chief obstruction to his progressive reforms. His defense: he did what he did for the good of the people.  He says he will follow processes and file a motion for reconsideration with the Court. Then he commits the gaffe of accusing the Court of committing the same proscribed cross-border transactions when in fact, the Court did not.

In yesterday’s SONA, the President wisely backed away from his tirades against the Supreme Court.  What he did was to ask his allies in the Lower House to act on a proposed P2.3 trillion 2015 budget which will give him the leeway to spend public money as he saw fit. 


He spent the initial part of the SONA listing his accomplishments in a rather haphazard manner and lacking a unifying or thematic framework that could have earned him a very low grade if he was making the presentation in my class.  It was too micro and a big picture is barely discernible. 


While the accomplishments are praiseworthy, I would have wanted them to be presented in the context of what needs to be done for the remainder of his term.  A generic “good governance” may suffice at the beginning of his term but is inadequate given the context of his remaining years.


I think he made a few assertions regarding the swiftness of government’s response to the super-typhoon Haiyan that can be effectively challenged by the victims themselves and fact checkers.


The single most important gap is the parochialism of the speech.  President Aquino focused on domestic matters and did not respond to urgent foreign policy concerns.  For instance, there was no mention of (continuing?) preparations for the impending 2015 full integration of the Association of Southeast Asian Nations (ASEAN).
He spends some choice minutes by attacking his critics and so-called “enemies of reform” first before individually naming and praising allies and well-meaning Filipinos who can continue his reform efforts even after he steps down from the Presidency.  He succumbed to the cheap joy of finding comfort among friends instead of embarking on the more difficult path of reaching out and establishing broad unity.


While I am pessimistic of the prospects, I do hope he will change his stance and will be the President of all Filipinos.  That is after all what is contained in his oath of office.




Pro-administration Team Pnoy senatorial slate

Pro-administration Team Pnoy senatorial slate

The campaign period for the May 2013 by-elections has started.  It is probably the best time to review what we (should or already) know about elections in the Philippines.   

UNA: opposition senatorial slate

UNA: opposition senatorial slate

  1. Even if the Philippines is in the tropics, it also has four seasons like temperate countries. It has a dry and a wet season.  And there’s the Christmas season–purportedly the longest Christmas celebration in the world.  It starts in September and ends in early January of the following year.  Last but not least is the election season, which starts in January and ends in the middle of May.  Note that the election season almost immediately follows Christmas for a seamless stream of festivities.  Formally, elections are held only every three years.  However, politicians (incumbents especially) usually behave as if elections will be held tomorrow.  So they preen, and they tidy up, and they put their best foot forward, and dispense all kinds of goodies to constituents.
  2. There are only two kinds of politicians in Philippine elections: the winners and the cheated.  Instead of conceding gracefully, the default behaviour of losing candidate is to claim the occurrence of fraud in favour of the winning candidate.
  3. Even if the Philippines is the oldest democracy in Asia, it took more than a century to modernize the way we vote and count votes.  Younger Asian democracies (with larger populations) like India had started using electronic voting machines since 1999.  In contrast, the Philippines adopted similar machines on a nation-wide basis only in 2010.  In both countries, though, the credibility of the voting machines rests on an independent verification system  designed to allow voters verify that their votes were cast correctly, to detect possible election fraud or malfunction, and to provide a means to audit the stored electronic results. Since every election in the Philippines is governed by a specific law, the continued use of voting machines is not assured. 

    Liberal Party: head of the ruling coalition

    Liberal Party: head of the ruling coalition

  4. The Philippine Constitution provides for a multi-party system, which is actually more fit for a parliamentary system.  While multiple parties exist in name, most of them are mere vehicles for electoral bids of key politicians. There is no prohibition on party switching and voters do not penalize politicians who switch
    Nacionalista Party: a component of Team Pnoy

    Nacionalista Party: a component of Team Pnoy

    parties.  For example, the senatorial slate of President Benigno Aquino is composed of candidates from several political parties.  The opposition line-up is similarly constituted by politicians from different parties.  What makes the situation rather absurd is the

    PDP Laban: a component of the UNA slate

    PDP Laban: a component of the UNA slate

    adoption by the opposing coalitions of three guest candidates. It is an indication of the bankruptcy and lack of imagination on both sides.  There is surely no lack of suitable candidates on both camps but they decided instead to guest ‘sure-win’ candidates.  In the past week, so-called guest candidates chose to campaign with the administration candidates.  This prompted threats from the opposition coalition that it will no longer carry said guest candidates followed by inane

    PMP: another component of the UNA slate

    PMP: another component of the UNA slate

    ripostes from some of the ‘guests’ that their loyalty is to the Filipino people and not to any political coalition.

  5. At the end of an election (general or otherwise), political alignments will either be with or against the incumbent administration.  There is no rule prohibiting those who styled themselves as opposition candidates and won to join the pro-administration coalition after the elections.  The move is explained as a way to ensure funds for district projects, the idea being the President is more inclined to approve projects if they were proposed by political allies rather by political opponents.  Sometimes, it does not work in such a neat way. Presidents may court the critical votes of opposition politicians by providing pork barrel allocations and other forms of patronage.
  6. The discussion above highlights the difference between candidate-centered vs. party-centered electoral systems.  In party-centred polities, political parties choose their candidates through primaries, party conventions and caucuses.  In these polities, party discipline prevails; party members follow the party (voting) line in legislative bodies.  It is unthinkable for politicians to switch parties like butterflies flitting from a flower to another.  In sum, what is important is the political party as a ‘brand’.  It stands for something–an ideology, a political program–and its leaders and members are secondary.  Votes are cast for a politician because he is strongly associated with a party ‘brand’.  In contrast, parties are not strong ‘brands’ in candidate-centered systems.  Candidates are the ‘brands’ and political parties are just extraneous packaging or wrappings that may be changed in the next election.  The candidate does not need an ideology or a political program.  Rather, he must have a reputation of performance–of providing divisible favors to constituents,  supporters, and financiers such as hand-outs, jobs, infrastructure projects, and preferential treatment by government such as exemptions and special credits.  He then claims that these ‘public goods’ were made possible by his ‘private performance’.  Thus, the ubiquitous presence of ‘Epal[1] tarps’ in all corners of archipelago make sense.

    Example of epal tarp

    Example of epal tarp

  7. In candidate-centered polities like the Philippines, the differences between legislators and local chief executives are blurred.  Voters and politicians alike do not consider legislation as the primary work of legislators.  If a legislator behaved as a pure legislator and concentrated on making laws, he will most likely not be re-elected.  Voters will see him as a useless politician since he did not ‘bring home the bacon’.  The legislator must behave like local chief executives (LCEs),  as provincial governors, city and town mayors, and even barangay captains,  who must deliver divisible goods.  For this reason, among others, legislators and  LCEs had seen it fit to play a game of electoral musical chairs especially since the enactment of the Local Government Code (LGC) in 1991.  Through the 1991 LGC,  funds available to LCEs of some local government units (LGUs) became more substantial than those of congressional district representatives.  However, a better explanation for this behavior is the term-limit rule.  Representatives and LCEs can only serve for three consecutive terms of three years each.   The ability to run for other electoral posts helps politicians with expiring terms to maintain their hold on political power. 
  8. The other way around term-limits is to field relatives (wife, husband, son, daughter, etc.) for the soon-to-be vacated post(s).  This could just be a bench-warming strategy; the relative keeps the post for a three-year term until the principal is eligible once more to run for the post.  However, it could also be an expansionist strategy.  The ‘bench-warmer’ had gained valuable experience and exposure; these assets could be parlayed into another electoral post.  These circumstances can explain the origins of political dynasties in the Philippines.  Let’s recall the case of former President Gloria Macapagal-Arroyo.  Arroyo hunkered into a survival strategy after her electoral mandate was put
    Gloria Macapagal-Arroyo

    Gloria Macapagal-Arroyo

    into serious question after the 2005 ‘Hello Garci’ scandal.  The strategy apparently covered the post-presidency period and Arroyo ran for a congressional seat in her home province to acquire a modicum of immunity.  During her incumbency as President, that same seat was occupied by one of her sons.  To accommodate her, the son did not contest the same seat but chose to run for another post instead.  The filial ties between mother and son were key to this unprecedented post-presidential survival strategy. 

  9. The Philippine Constitution explicitly prohibits political dynasties.  However, the same constitutional provision is not self-executory and requires that an enabling law must be passed.  However, all attempts to pass such a law have failed so far, and understandably so since most legislators are members of what could be rightly called political dynasties.  The current by-elections can lead to the consolidation of several political dynasties associated with the biggest and brightest names in Philippine politics–Aquino, Angara, Enrile, Cojuangco, Escudero, Binay,  etc.  The political dynasty issue is rather a complicated one.  Proponents of banning or controlling political dynasties argue that it will strengthen Philippine democracy by broadening choice of candidates and removing the undue advantages of dynasties (wealth, experience, exposure, and name recall, among others).  Those who would advise caution think an anti-dynasty law is actually an unconstitutional provision.  It violates the equal treatment clause of the Constitution.  Why should a son or daughter or a brother or a grandson or an uncle be prohibited from contesting an electoral post because a relative is in power?  What would justify discriminatory treatment?
  10. One thing that political dynasties have going for them is that they are better able to handle the ever-rising costs of elections.  Key considerations are population growth–the growth of the voting population–and the rather fixed length of the electoral campaign period.  In the past, candidates (especially those for national posts) thought it was adequate to rely on hand-shaking, posters, flyers, city-hopping, and miting-de-avance to win.  However, the increased number of voters and the fixed
    TV spot for Pnoy during 2010 election campaign

    TV spot for Pnoy during 2010 election campaign

    campaign period forced candidates to use television and radio as the primary campaign tools.  Not that the mass media corporations are complaining.  They are in fact so happy since a previous ban on electronic campaigning was lifted.  The increased prominence of electronic media in Philippine elections raises serious questions regarding election campaign finance and electronic campaigning.  If TV and radio presence is a function of a candidate’s money, if TV and radio presence enhances a candidate’s name recall and chances of winning, what rules are being implemented regarding these activities?  Are they adequate?  What reforms are needed?

    TV spot for 2010 presidential candidate Gibo Teodoro

    TV spot for 2010 presidential candidate Gibo Teodoro


  This is not an exhaustive list; it could be expanded to 50 things about Philippine elections.  Perhaps we can end with the question: is it more fun with Philippine elections?  The response will be mixed.  We do not a have a porn star-member of the Italian parliament who delivers her speeches with a breast exposed.  We do not have brawling

Brawling Taiwanese legislators

Brawling Taiwanese legislators

parliamentarians as in Taiwan and South Korea.  On the other hand, our elections are fun!  We love our elections!  Elections are fiestas, extravaganzas, spectator sports, boxing bouts, and cockfights all rolled into one.  There are movie stars, starlets, stand-up comics, and dance troupes galore.  And there’s food and drink. And cash gifts!    Reportage on elections reflect these metaphors.   Now you know why a lot of Filipinos want elections to happen annually rather than every three years.

Miting de avance

Miting de avance

[1] ‘Epal‘ is a play on and is derived from the Filipino word ‘mapapel‘.  Roughly translated into English, it means ‘credit grabbing’ or ‘attention grabbing’.  It is obviously a pejorative; the politician is admonished for trumpeting what he is duty-bound to do.  Epal also creates two related discourses: the public should be grateful to the politician and that, perhaps, the politician is spending his personal money for the public’s benefit.  The tarp (short for tarpaulins) became the medium of choice with the advent of appropriate software and large printers.

After enjoying tax breaks, can an established church receive money from government without violating the Constitutional provision of Church-State separation?

Seven Catholic bishops figured prominently in the news over the past week as they were reported by the Commission on Audit (COA) to have obtained funds from the state-run Philippine Charity Sweepstakes Office (PCSO) during the presidency of Gloria Macapagal Arroyo (GMA) for the purchase of motor vehicles.  

Most controversial among them was Bishop Juan de Dios Pueblos of Butuan who reportedly asked GMA in a damning letter to gift him with a new vehicle on his birthday.

Bishop Juan de Dios Pueblos

The controversy goaded the Senate blue ribbon committee to invite the seven to a public hearing.  Absent a subpoena, all six bishops attended the hearing save for one who was abroad.  The latter still sent his representative, though.

Bishops in Senate hearing (from Philippine Inquirer

Bishops in Senate hearing (from the Philippine Daily Inquirer)

Perhaps, the bishops knew they will get off the hook at the Senate.

Prior to the Senate hearing, there was much ado over the fact that none of the purchased vehicles were Mitsubishi Pajeros.   PCSO Chairman Margie Juico was chastened over this gaffe; she apologized; and yet some demanded that she resign from her post.

I believe too much was made out of this ‘error’.  Granted that the vehicles purchased were not Pajeros (which cost from 2.5 million to 2.7 million in today’s prices), the actual vehicles were not chicken feed themselves.  At today’s prices, Mitshubishi Monteros cost 1.3 to 1.5 million apiece, Mitshubishi Stradas cost 0.87 to 1.3 million, and Isuzu Crosswind Sportivos cost 1.15 to 1.22 million.

I could not obtain the actual purchase prices of the bishops’ vehicles.  However, the current prices should give us an idea of how much they cost in comparison to Pajeros.

The Senate hearings started with Senator Miriam Defensor Santiago absolving the bishops even before testimony was heard.  Her colleagues followed suit and softened up.  

In summation, blue ribbon committee chairman Senator Teofisto Guingona II said: “What happened is we had closure to the issue.  It was also proved that there was no Pajero.  The bishops were able to air their side.  The PCSO also said sorry that there was no Pajero.  There was no closure.  We were able to establish that the vehicles were used for secular purposes.”

Senator Teofisto Guingona III

I can only surmise that the Senators were mollified by the pastoral statement issued earlier by the Catholic Bishops of the Philippines (CBCP) and read by CBCP outgoing president Bishop Nereo Odchimar.  The letter had the bishops admitting: “As sheperds struggling to love you like Jesus the Good Sheperd, we are sorry for the pain and sadness that these events have brought upon you.”  

I also suspect that they were also impressed by a mythical Catholic vote that could be mustered by the bishops.

Ultimately, the Senate hearing was a disappointing dud.

Notwithstanding errors, the identity of the vehicles were not the issue.  It was not even whether the vehicles benefited the bishops and their dioceses in a merely incidental manner, as averred by Senator Santiago.

Was it a matter of quid pro quo?  As the Inquirer asked, why were the seven bishops favored?  Did these bishops reciprocate with political support for the embattled GMA?  Perhaps, the answers to these questions can be learned from the former officials of PCSO.

Alas, we did not get much illumination from the Senate this time.

Perhaps, the issues can be clarified by the courts.

That may be necessary as four Catholic bishops reportedly urged President Noynoy Aquino and PCSO Chairman Margie Juico to make a public apology for supposedly dragging the Church into the Pajero scandal.  

The on-going legal and extra-legal contortions regarding the ultimate fate of the plundering general Carlos Garcia (ret.) that might allow him (and his family members) off the hook induced me to share this paper.

Major Gen. Carlos Garcia (ret.)

The military establishment is one of a society’s institutions that is not immune to, or may even be particularly prone to corruption.  As an agency of the state, it is tasked to provide a particular public good (external defense) and is provided with public funds to provide the same.

In the Philippines, however, the Philippine military has not functioned properly and has been unable to provide for the country’s national defense.  For much of its history since independence in July 1946, the Philippines was essentially an American protectorate and housed, among many others, two of the most important military bases outside of the continental United States—which served as the headquarters of the US 7th Fleet and the 13th Air Force.

Essentially, the Philippine military was reduced to police functions particularly the prosecution of counter-insurgency efforts against communist and secessionist guerillas.  Even when a separate national police force was created (the dictator Ferdinand Marcos consolidated the Philippine Constabulary and the different local police forces), save for a brief period, the Philippine military was primarily tasked with counter-insurgency as it was clear that the police was not up to the task.  It also had to create irregular or militia forces to help fight the insurgents while also involving the police in the overall effort.  For this reason, the bulk of the Philippine military are the ground forces since it had to content itself with old hand-me-downs from the Americans with respect to its naval vessels and aircraft.

After the military bases agreement with the United States expired in 1991, the Philippines entered into a Visiting Forces Agreement (VFA) with the US (given the survival of the RP-US Military Defense Treaty) following what was perceived by all concerned parties to be aggressive and unanswered Chinese moves on the Spratly islands.  In effect, with the VFA, the Philippines returned to a protectorate status as the Asian financial crisis of the late 1990s derailed military modernization plans.

Mapping corruption in the Philippine military

It is within the overall context established in the introductory section that we should situate corruption within the Philippine military.  Corruption always thrives when and where detection and punishment mechanisms are either weak or non-existent.  Thus, corruption is relatively risk-free and truly rewarding or gainful.

Corruption Mapping is similar to Integrity System Mapping except that it examines the networks and institutions that seek to capture and use institutional power for private benefit rather than those seeking to combat such behavior. However, we should also understand corruption in a wider sense to mean the debasement of public institutions and functions even if not for private gain.  Corruption mapping seeks to understand the interaction between corrupt individuals, networks and institutions to see how corruption in one institution assists successful corruption in others by example, by helping to ensure that corrupt deals are effective and by helping to provide impunity. The emphasis is not on particular individuals but on the modus operandi of corruption in particular sectors and the networking of corrupt officials and those who would corrupt them.

Accordingly, corruption mapping looks to ‘MOs’, techniques, systems and networks rather than particular individuals.

Corruption within the Philippine military is possible both in times of war and peace.  During times of peace, military corruption occurs in several key areas.  These include:

  1. Procurement of non-military equipment and supplies
  2. Procurement of military equipment, hardware and defense supplies;
  3. Bloating of servicemen and veterans’ rolls; and
  4. Operation of criminal rackets including gun-running, smuggling, protection of crime- and warlords, etc.

As in all other public bureaucracies, the Philippine military is plagued with corrupt contracts in the supply of civilian or non-military goods.  I was witness to a particular instance when I was newly appointed an officer of the national defense college in the late ‘90s.  We had a spanking-new building but when the rains started, the roofs

National Defense College of the Philippines

started leaking because cheap or sub-standard materials were used.  We were lucky our expensive computer and networking equipment (which I later found out were also over-priced) were not ruined since the 3rd floor was flooded.  After the rains, the building walls showed cracks and other defects.   After I presented a full report to my boss, I started receiving death threats.  My boss retreated from investigating the mess when the head of the senate defense committee, who belonged to the same armed service as the outgoing college president, reportedly threatened to reduce the college’s budget to a single peso.

In the procurement of war material and equipment, corruption can either take the form of over-pricing and/or siphoning of allocated funds.  Military quartermasters will report inflated prices for military supplies to be purchased and thus the military budget for a particular year will be larger than what it should be—to the detriment of the country’s taxpayers.  Then, they turn around and siphon monies from the allocated amounts this time to the detriment of the fighting men and women at the basic levels who have to contend with defective ammo, firearms, combat boots, uniforms, tents, and other military equipment.  Or the front troops may not have enough gas to run their vehicles and therefore their operations suffer.

Corruption also takes the form of bloated rolls for servicemen and veterans.  The essential objective is for corrupt individuals and networks to continuously collect the pay of ‘ghost’ soldiers and veterans.  Bloating of servicemen’s rolls is comparatively easier with militia than with the regular services because of the irregular character of the forces involved.  It is more difficult to verify the accuracy of militia rolls compared to the list of regular servicemen.  With respect to veterans, aside from bloated rolls, another form of corruption is to conceal the death of veterans so they can continue to draw their financial benefits.  Of course, the relatives of the already-dead veterans partake of the ill-gotten gains but they have to share with the corrupt employees in the Philippine Veteran Affairs Office (PVAO).

A more insidious form of corruption is the military’s involvement in criminal activities such as smuggling, gun-running, and protection rackets. These forms of corruption are amply illustrated by the unsolved murder (declared a suicide by the Philippine Navy) of Ensign Philip Pestaño.

Ensign Philip Pestaño

On September 27, 1995, he was found dead in his cabin in the Navy logistics ship BRP (Barko ng Republika ng Pilipinas) Bacolod City. Ensign Philip Andrew Azarcon Pestaño was the ship’s deck officer and cargo master.

The Pestaño case

Here is Fr. James Reuter’s account of the circumstances surrounding Pestaño’s death:

“He discovered that the cargo being loaded onto his vessel included logs that were cut down illegally, were carried to the ship illegally, and were destined to be sold, illegally. Then there were 50 sacks of flour, which were not flour, but shabu—worth billions. Literally, billions. And there were military weapons which were destined for sale to the Abu Sayyaf. He felt that he could not approve this cargo.

Father James reuter

“Superior officers came to him and said: ‘Please! Be reasonable! This is big business. It involves many important people. Approve this cargo.’ But Phillip could not, in conscience, sign approval.

“Then his parents received two phone calls, saying: ‘Get your son off that ship! He is going to be killed!’ When Phillip was given leave at home, his family begged him not to go back. Their efforts at persuasion continued until his last night at home, when Phillip was already in bed.

“His father came to him and said: ‘Please, son, resign your commission. Give up your military career. Don’t go back. We want you alive. If you go back to that ship, it will be the end of you!’ But Phillip said to his father: ‘Kawawa ang bayan!’ And he went back to the ship.

“The scheduled trip was very brief—from Cavite to Roxas Boulevard—it usually took only 45 minutes. But on September 27, 1995, it took one-hour-and-a-half. When the ship arrived at Roxas Boulevard, Ensign Pestaño was dead.”

The Navy immediately ruled his death a suicide, based on a suicide note found in his stateroom. Handwriting experts eventually concluded the note was a forgery.

In 1997, two years after the incident, Gloria Macapagal Arroyo, then a senator, sponsored a resolution that started a Senate investigation on Pestaño’s mysterious death.

The Senate’s findings are detailed in Senate Report 800.

Here are excerpts from that report:

“Pestaño did not kill himself aboard the BRP Bacolod City. . . . He was bludgeoned unconscious and then shot to death somewhere else in the vessel. His body was moved and laid on the bed where it was found. . . .

“The clear absence of blood spatters, bone fragments or other human tissues is physical evidence more eloquent than a hundred witnesses. It is impossible for a person who has just sustained a fatal head injury to walk from some other place in his room, lie on his bed and drop dead. . . .

“He was killed by an assailant, necessarily aboard the BRP Bacolod City. . . . The attempt to make it appear Pestaño killed himself, inside his stateroom, was so deliberate and elaborate that one person could not have accomplished it by himself.”

The Senate asked Ombudsman Aniano Desierto, a former Judge Advocate General, to reinvestigate the Pestaño case.

He replied: “the conduct of further investigation in order to find out the identity of the perpetrator and his accomplices, if any, will only be a waste of time considering that the physical evidence has already been tampered with, not to mention the lapse of time.”

Fortunately, Desierto’s successor, Simeon Marcelo, reopened the case. A complaint for murder and grave misconduct was filed against ship captain LCDR (lieutenant commander) Ordoñez et al.

Unfortunately, there has been very little movement in the case since. The parents of Pestaño said, “Ombudsman Merceditas Gutierrez [Marcelo’s successor] has not agreed to see us.”

The Pestaño case is the best example of a culture of corruption among the Armed Forces of the Philippines brass.

Here is the intro of a masters’ thesis written by Sen. Antonio Trillanes IV, then a lieutenant in the Navy:

Antonio Trillanes IV

“[I]n February 2001, the Philippine Navy [and the AFP] was rocked by a leadership crisis when the Philippine Marines [PMAR] demanded the relief of the flag-officer-in-command, Rear Admiral Wong. The crisis was triggered by the berating of the Marines by RAdm Wong for alleged irregularities in the procurement of P3.8 million worth of Kevlar helmets. In the events that followed, the Marines prevailed and RAdm Wong was stripped of his command and was ‘promoted’ to an ambassadorial post. The crisis, while it was eventually resolved peacefully, exposed a previously unseen face of the Navy, and that is the face of CORRUPTION.”

In 2003 Trillanes and the Magdalo Group launched what is now known as the Oakwood mutiny. It was against unabated corruption in the military.

In 2005 the LTA building, owned by the Arroyos and headquarters of lawyers known as “The Firm,” was bombed by renegade soldiers who called themselves Enlightened Warriors. They said:

“We are inspired by the memory of our fallen fellow soldiers who valiantly stood against corruption and for the interest of the country: Navy Ensign Philip Pestaño, 2nd Lt. Jessica Chavez, Air Force Capt. Panfilo Villaruel Jr. We are illuminated by their spirit and vow to pursue their ideals and make every drop of their blood worth their ultimate sacrifice.”

Gloria Arroyo filed the resolution asking the Senate to investigate the Pestaño case; she can now ensure its resolution—she handpicked Ombudsman Merceditas Gutierrez, AFP Chief of Staff Gen. Hermogenes Esperon is her personal bodyguard, and she has always claimed, “A President is always as strong as she wants to be.”

So, if she fails to resolve the case, despite all the powers at her command, Pestano’s last words to his parents, “Kawawa ang bayan,” will be a fitting epitaph to Gloria Arroyo’s reign.

In August 2010, the Office of the Ombudsman dismissed the murder charges filed by the family of Ensign Phillip Pestaño against Philippine Navy officials.  It didn’t even take into consideration the findings of the United Nations Commission on Human Rights released six days before it finalized its own that said, “It now appears undisputed that the death of the author’s son was a violent one, resulting from homicide.”  Homicide is still murder, even if at a lesser degree. It’s not suicide as Navy officials claim.

The Maguindanao massacre

The massacre of the female relatives and legal counsel of a rival of the powerful Ampatuan family of Maguindanao province, together with a great number of journalists in November 2009—considered the worst case of political violence in recent years—is another illustration of corruption within the Philippine armed services (military and police) as well as the rest of the state bureaucracy and officialdom (up to the presidential palace).

After initially hesitating to go after the apparent perpetrators, President Gloria Macapagal Arroyo declared a state of emergency in the province and launched joint police-military operations to disarm the followers and supporters of the Ampatuan clan.  In the clan’s mansions and surrounding grounds, security forces discovered troves of cash, arms caches, and armored cars (with Philippine National Police signage).  The arms and ammo boxes bore the mark of the Philippine Army and PNP armories.

A member of the Ampatuan clan arrested by police

The Ampatuan case illustrates the cozy and corrupt alliance between central state officials and local warlord families.  Ostensibly in support of counter-insurgency efforts but actually for purposes of delivering vote banks in favor of incumbent Palace occupants, local warlords are equipped with arms and equipment from the state’s armories and allowed to operate criminal activities (including gambling, drug trading, etc.) provided a share of the illicit gains is kicked upstairs.

Corruption during combat operations

During the conduct of actual combat operations, corruption can take the form of the intentional loss of equipment and supplies with the eventual intent of selling the same for private profit.  This is possible since it is easy to claim such a loss during the heat of combat.  It is also difficult to audit how much ammunition was expended during a military operation.  So corrupt/criminal commanders can report they used so much ammo and lost so much firearms and equipment but the actual ammo expenditure is actually so much less and no firearms and equipment were actually lost.  The differential is spirited away and sold even to warlords and the guerillas themselves for private gain.

Even as early as the 1950s when the military was fighting Huk guerillas, the inflation of insurgent strength was usually resorted to obtain a higher military budget.  In recent years, the tactic of ‘acoustic warfare’ was adopted where fake military encounters (especially in Mindanao where the operations were conventional in nature) were mounted also for the purpose of seeking larger military budgets.  Acoustic wars with mythical gains and casualties inflicted on the enemy (most often, collaterally-damaged civilians are cynically identified as insurgents) proved to be the laurels that will promote many officers to star rank.  Acoustic war is also a cover for an overstatement of ammo used and equipment lost or damaged.

Corruption of the military by the political leadership of the country

What had been discussed earlier were the corrupt practices undertaken within the Philippine military.  The Ampatuan massacre indicates how the military could be corrupted by civilians, particularly by the country’s political leadership.

However, there is a case that illustrates better how the military establishment (or at least its top command) is corrupted by the country’s political leaders and in turn corrupt the country’s electoral processes and democracy in general.  The scandalous revelation of the so-called ‘Garci tapes’—which suggest a prima facie case of


systematic electoral fraud carried through the active collaboration of the electoral bodies and key military commands to benefit the incumbent chief executive.  And the chief executive shielded the military commanders involved from investigation and criminal prosecution, and the latter were even promoted since then.  The said electoral scandal catalyzed, among others, discontent and disgruntlement within the ranks and helped lead to the 2006 and the 2007 coup attempts.

In effect, a corrupted military is a de-militarized institution since non-military ‘functions’ detract from its military function.  The military should only have and pursue a military function.  One of the key ways to rebuild the military is to remove its ‘non-military burden’ from its shoulders, a burden imposed upon it by feckless civilian politicians.  In effect, a military establishment is largely corrupted not primarily by impulses from within but essentially by influence from without.

The ideal in democracies is civilian control over the military.  However, in jurisdiction like the Philippines where institutions are relatively weak across the board, how corrupt politicians can induce non-corrupt behavior within the military is a great challenge.  Apparently, a countervailing power from the citizenry has the responsibility.  Voters can throw out corrupt or incompetent and non-performing politicians through the ballot box.  How can ordinary and unarmed civilians check corruption within the military?


The blog entry is a reproduction of a paper I presented  during an anti-corruption workshop organized by the Center for Asian Integrity (CAI) in the Manila Peninsula Hotel early last month.


Maguindanao massacre montage

Magdalo mutineers in Oakwood

Ombudsman Merceditas Gutierrez

The dead ensign

Aging veterans

Early in PGMA’s full term, a new sin tax law (that again failed to index tax rates to price changes) was passed together with a reformed VAT law (which increased the VAT rate from 10% to 12% and

President Gloria Macapagal Arroyo

 expanded VAT coverage) and a lateral attrition law (which provided a stick-and-carrot system to spur revenue collection) by the 13th Congress from late 2004 up to the first half of 2005.  The political crisis that ensued after the surfacing of tapped telephone conversations between President Arroyo and a high-ranking election officer (which alleged vote padding in her favor during the 2004 presidential elections) precluded the possibility of subsequent tax reforms.  Several conclusions could be made after a careful assessment of the tax reform initiatives undertaken since Arroyo became the country’s President in January 2001.

  • Initiatives to improve tax administration are comparatively the most difficult to enact into law, as shown in the IRMA-NARA episodes.  Legislators, especially members of the House of Representatives, apparently do not see any possibility of extracting divisible policy favors in this arena.  For this reason, tax administration reforms continued to wither on the vine even if the country faced formidable fiscal problems.   In fact, some of them behaved as if they were oblivious to these difficulties and proposed a moratorium of new taxes.


  • The alacrity of legislators to provide divisible policy favors to constituents, supporters and financiers alike continue to be illustrated by the primary attention accorded to and the immediate passage of the tax amnesty measure.  In this occasion, members of the House outdid its predecessors when they made tax delinquents with pending or final tax assessments and with pending court cases eligible for the tax amnesty.  The almost give-away amnesty rates (a standard rate 2-3% of net worth; 10% for those with pending assessments; and 20% for those with final assessments and pending court cases) approved by the House members is another indication of readiness to cater to special interests.


  • The pronounced difference in the private-regardedness in policy preferences of the House compared to the Senate can be seen in the ‘sin’ tax measure. 


  • The salience of individual legislators and legislative committees noted during the Ramos presidency continued during the Arroyo presidency.  This is to be expected since the institutional parameters and structures of Philippine tax policy making remained unchanged.  The House Ways and Means Committee continued to be instrumental in watering down the tax reform proposals of the Executive, particularly the Department of Finance, even if said measures were certified urgent by the President. 


  • Familiar individual legislators, such as Reps. Exequiel Javier, Eric Singson, Raul del Mar and

    Raul del Mar

    Rep. Eric Singson

    Catalino Figueroa continued their predisposition to champion the needs of special interests.  Javier, Singson and del Mar separately authored bills providing for tax amnesty.  In addition, Javier spearheaded efforts to question the constitutionality of the provision requiring every taxpayer to submit a statement of assets and liabilities (HOR-CAD 2004a).  Javier also sponsored HB 2653 that proposed a shift in the excise taxation of tobacco products alone (excluding alcohol) back to the ad valorem system. In another coincidence, Fortune Tobacco also favored a shift back to the ad valorem tax system for cigarettes (HOR-CAD 2004b).  The veteran lawmaker also sponsored HB 2456 aptly titled “An act to recapture the power over tariffs,” which proposed to amend Section 401 of the Tariff and Customs Code.  This particular section empowers the President to set tariff rates for imported products when Congress was not in session.  The thrust of Javier’s proposed bill is to limit the powers of the President in this regard (HOR-HM 2004b). For his part, Figueroa filed HB 2509 that sought to abolish the value-added tax (VAT) (HOR-HM 2004a).

In her first State of the Nation Address (SONA) after the inauguration of her second term, President Arroyo

asked Congress to pass some 8 tax measures designed to increase government revenues by at least P80 billion (PDI 2004a).  Even as the fiscal health of government was in bad shape, none among the top government officials and monetary authorities were prepared at the time to acknowledge the situation.  Bangko Sentral Governor Rafael Buenaventura

BSP governor Rafael Buenaventura

earlier rejected a proposal from Rep. Joey Sarte Salceda (Albay) to declare that the government was in “fiscal crisis” to be able to suspend the release of internal revenue allotments (IRA) to local government units (LGUs) under Republic Act 7160.  Buenaventura feared that such a declaration could be misconstrued as plans to default on the country’s debts.  The financial markets were spooked earlier by calls for debt restructuring made by opposition Presidential candidate Fernando Poe Jr. interpreting them as plans for debt default (Dumlao 2004a).

Rep. Joey Salceda

Before the 13th Congress was convened, President Arroyo ordered an increase in the tariff duties on crude and refined petroleum products to 5% from the previous 3 percent upon the recommendation of the Cabinet’s Tariff and Related Matters (TRM) committee. While the across-the-board increase in import levies on both crude and finished products will not be implemented until world oil prices started showing signs of a downtrend, Energy Secretary Vincent Perez explained that the measure was a temporary measure to help plug the budget deficit.  Once Congress passed a tax law on petroleum products, the executive order would cease to take effect.  Before the issuance of the said executive order, Rep. Danilo Suarez (Quezon) filed a bill that would increase specific taxes on petroleum products by P2.00 per liter (Ho 2004a, 2004b).

Among the measures proposed by President Arroyo in the July 2004 SONA included a shift to gross income taxation, additional taxes on petroleum and sin products, rationalization of fiscal incentives, a windfall tax on the income of telecommunications firms, a new tax amnesty, and the creation of a performance-based reward and punishment system for revenue agencies.  She also proposed to scrap the value added tax (VAT) to be replaced by a tax that is “simpler to administer and would increase compliance” (Dalangin-Fernandez 2004a).  This proposal was met with surprised reaction from the general public.  Finance Secretary Juanita Amatong

explained that the government proposed a two-step increase in the VAT rate from the current 10% rate, first to 12% and then to 14% to boost collection.  Initial government estimates project at least P19.9 billion in additional revenue annually if the VAT rate was raised.  Amatong said that if the target VAT collection was not achieved even if the rate was increased to 14%, then it could be replaced by a new tax.  The National Tax Research Center (NTRC) found that government had been losing an average of P30.7 billion yearly during the 1999-2002 period from VAT leakages (Remo 2004a).

Of the tax measures proposed by President Arroyo during the SONA, the one providing for a tax amnesty was first acted upon by the House.  House Bill 552 was filed by Rep. Danilo Suarez proposing condonation of tax

liabilities and granting immunity from penalties to taxpayers who have unpaid taxes for 2003 and prior years.  The bill suggested that tax delinquents pay only 2-3% of their net worth.  Specifically, resident citizens with tax delinquencies would be required to pay only twenty thousand pesos (P20,000) or 3% of their net worth as of 31 December 2003, whichever is higher.   Non-residents will pay either fifteen thousand pesos (P15,000) or 2% of their net worth.  Corporations classified as large taxpayers (or those with a subscribed capital of more than P50 million) shall be required to pay five hundred thousand pesos (P500,000) or 3% of their net worth, whichever is higher.  Medium-sized firms (or those with a subscribed capital of between P20 million and P50 million) shall be required to pay either two hundred fifty thousand pesos (P250,000) or 3% of their net worth.  Small firms (or those with a subscribed capital of P20 million or less) will only have to pay one hundred thousand pesos (P100,000) or 3 percent of their net worth.  The tax amnesty bill will, if passed by Congress, require corporations and individuals whose assets as of 31 December 2003 reach at least one hundred thousand pesos (P100,000) to submit statements of assets and liabilities (SALs), which will serve as the government’s basis for determining net worth (the difference between assets and liabilities).  However, HB 552 disallowed the following from availing of the tax amnesty: those with tax-related cases filed in court before the bill becomes a law and takes effect; those with final assessment notices from the BIR; and those that act as withholding agents, with respect to their withheld taxes (Remo 2004b).

Some members of the House were apparently unaware or unmindful of the country’s fiscal bind. Rep. Pedro Pancho (Bulacan) of the ruling party filed House Bill 2286 calling for a five-year ban on the imposition of new taxes.  Pancho and some of his colleagues argued that government should instead improve the collection of existing taxes and plug tax loopholes (Remo 2004d).  The Department of Finance (DOF) was batting for a higher amnesty tax rate to be set at 10 percent.  It also differed from the Suarez bill by computing the tax amnesty based on the increase in a taxpayer’s net worth from year to year rather than on accumulated net worth as of a given period.  Finance Undersecretary Grace Tan explained that accumulated net worth included incomes from previous years that may have been taxed and should therefore not be taxed anymore.  The DOF also recommended that the amnesty tax should not be used to spare delinquent taxpayers from penalties under the Anti-Graft and Corrupt Practices Act.  In contrast, the Suarez bill provided that the delinquent taxpayer availing of the tax amnesty shall be immune from civil and criminal penalties under the National Internal Revenue Code, the Revised Penal Code, and the Anti-Graft and Corrupt Practices Act.  Tan reasoned that failure to pay taxes is not an act of graft even if it may be a crime (Remo 2004c).

The House will disappoint finance authorities in the weeks to come.  The DOF eventually acceded to the lower amnesty tax rate proposed by Rep. Suarez at 3% of net worth.  However, it proposed requiring all taxpayers to submit their statements of assets and liabilities (SALs) every year.  Finance Secretary Juanita Amatong explained the end-goal of the proposed tax amnesty is to create a database of all taxpayers to monitor the accuracy of their tax payments and to plug tax leakages (estimated at P200 billion yearly) through the database.  The House Ways and Means Committee reported a bill that removed the provision requiring the annual submission of SALs.  Some legislators, including Reps. Exequiel Javier, Junie Cua, Salacnib Baterina, and neophyte Teofisto Guingona III, believed that requiring taxpayers to annually submit their SALs might be unconstitutional (HOR-CAD 2004).  Others, such as Ways and Means Committee chairman Rep. Jesli Lapus and opposition Rep. Jesus Crispin Remulla, thought that the SAL requirement was cumbersome and should be embodied in a separate bill and not combined with the tax amnesty measure so the appropriateness of making one’s assets and liabilities a matter of public record could be debated extensively.  The BIR on the other hand believed that course of action would just be fine as long as Congress passed the SAL bill at around the same time as the tax amnesty measure (Remo 2004e).

In late September 2004, the House Ways and Means Committee decided, through House Bill 2933, to include delinquent taxpayers whose unpaid tax liabilities have been assessed by the BIR and who have pending court cases.[1] In his sponsorship speech for the measure, Rep. Jesli Lapus (Chairman of the House Ways and Means Committee) explained that delinquent taxpayers with either pending or final and executory

assessments and pending tax cases in courts should be allowed to avail of the amnesty since “the very essence of an amnesty is the condonation of all wrongdoings made in the past” (HORJ 2004, 53).  DOF officials believed granting tax amnesty even to tax delinquents with outstanding BIR assessments and pending court cases would weaken government efforts to improve tax compliance.  They argued that the amnesty should be available only to taxpayers whose unpaid tax liabilities have yet to be detected by the BIR (Remo 2004f).  Notwithstanding the infirmities of the House tax amnesty bill, President Arroyo certified it urgent, thus ruling out the possibility of a Presidential veto (Dalangin-Fernandez 2004b).   The Senate Ways and Means Committee apparently agreed with its House counterpart.  It also provided that delinquent taxpayers with BIR assessments and pending court cases were eligible for amnesty in the Senate version authored by Committee Chairman Senator Ralph Recto (PDI 2004e).

Former Economic Planning Secretary Solita ‘Winnie” Monsod believed that with the House tax amnesty version, the costs far outweigh any benefits it can bring.  Monsod zeroed in on the provision allowing those with tax assessments and pending court cases to avail of tax amnesty.  She noted that this leniency was never done before by the country’s tax authorities (Monsod 2004a).

In late August 2004, the UPSE group warned that the Philippines faced a credit downgrade from international rating agencies (such as Moody’s, Standard and Poor, and Fitch) if Congress failed to pass several tax bills (especially the sin tax measure) before the year-end.  These developments were to be interpreted by the rating bodies as a sign of the country’s fiscal resolve.  A credit downgrade will have the effective effect of raising the interest rates on foreign loans contracted by the Philippines.  Rep. Jesli Lapus, chairman of the House Ways and Means Committee noted that a 1% increase in interest rates meant additional P30 billion in debt service payments.  The warning of the economists apparently spurred legislative efforts.  The sin tax measure (HB 3174) was passed in third reading by the House in late October 2004.  HB 2996, or the so-called Lateral Attrition Bill, which provides a system of rewards and punishment for officials and staff of revenue collecting agencies, was passed by a 133-28 vote on 16 November 2004.  The measure decreed that failure to reach revenue targets by 1 to 10% would either mean a concerned official’s demotion, transfer, or dismissal (Romero 2004).

As in the past, the ‘sin’ tax measure continued to court debate, controversy, and allegations of bribery and undue influence.  In its original plan, the Department of Finance proposed an initial increase of 30% in the specific tax rates of all cigarette brands.  This increase represented the inflation rate from 1997 to 2003.  It also provided for an automatic increase of the tax rates every two years to factor in inflation and reclassification of brands (Remo 2004g).  Counter-proposals were aired by the affected corporate groups.  On one hand, Philip Morris Philippines, manufacturer of mostly high-priced cigarettes, suggested the imposition of a flat-rate increase in lieu of indexing the tax to inflation.  Philip Morris Philippines managing director Chris Nelson, who met President Arroyo as part of a delegation of the US-ASEAN Business Council, suggested increasing the tax on all cigarette brands by a peso (P1.00) per pack in the first year and by fifty centavos (P0.50) in succeeding years.  Officials of Fortune Tobacco and Associated Anglo American Tobacco, manufacturers of mostly medium- and low-end brands predictably opposed the Philip Morris proposal since the tax increases would be disproportionately borne by their products.  Anglo American President Florante Dy said that most of his firm’s brands were handmade cigarettes that paid an excise tax of P0.40 per pack of 30 sticks.  Under the flat-rate increase proposal, the taxes on their products will increase by as much as 250 percent.  Fortune Tobacco spokesman Salvador Mison meanwhile noted that the average tax rates will increase by as much as 90% while Philip Morris products will only shoulder an 18% additional tax (PDI 2004b).

At some point, proposals to return to the ad valorem system for excise taxation of ‘sin’ products were aired by some members of the House, notably Rep. Exequiel Javier.   Lobbying pressure from the cigarette makers prompted Congress to ask government for a lower tax rate.  In turn, the economic managers agreed to a lower increase of 20% in specific taxes, foregoing revenues worth about P3.6 billion.  The compromise was made upon the instance of President Arroyo to prevent delays in the passage of the tax measure (Remo 2004h).  For its part, the Bureau of Internal Revenue expressed the need to remove any ambiguity in the law so the agency would not be subject to tax refunds claims in the future.  BIR Commissioner Guillermo Parayno Jr. noted vagueness in RA 8240, which simply said the tax rates on cigarettes should be increased by 12% in 2000 but did not clearly state the new tax rates in pesos terms, was the main argument used by Fortune Tobacco in asking for tax refunds.  The courts apparently agreed with Fortune and ordered the BIR to refund Fortune in the amount of P1 billion (Remo 2004i).

President Arroyo sought to facilitate the ‘sin’ tax bill’s passage by meeting privately on October 25 with key officials of sin product manufacturers (San Miguel Corporation, Philip Morris and Fortune Tobacco) in her Forbes Park residence.  Arroyo’s action was precipitated by successive warnings of a credit downgrade from various ratings agencies if Congress failed to enact new tax laws, specially the ‘sin’ tax bill (PDI 2004c).  The private meeting was called after the House Ways and Means Committee proposed raising sin tax rates by 20% in 2005 and by 3% thereafter in 2006 and 2007 instead of indexing the taxes to inflation.  Arroyo also certified the bill as urgent after the private meeting with the business tycoons (PDI 2004d).

In a grueling session that stretched to the early morning of October 28, the House approved HB 3174 with an impressive 144-10-1 vote despite charges of railroading from the opposition.  The chamber upheld the version reported by its Ways and Means Committee.  Opposition solons complained that the majority cut short the period of amendments during the plenary session.  For instance, Rep. Alan Peter Cayetano said he wanted to

include an amendment that would prohibit duty free shops from selling smuggled tobacco products (Avendaño and Pablo 2004; Ager 2004).  The House’s approval of the sin tax measure buoyed Malacañang’s spirits.  In early November, President Arroyo declared that although the country still had a fiscal problem, its situation could not be described as a fiscal crisis as she had acknowledged earlier “because the resolution is underway” (Cabacungan 2004c).  However, the President also gave signs of further amendments of the tax measure.  In her October 25 meeting with sin product manufacturers, President Arroyo said she proposed a compromise formula calling for a combined 12% and P0.40 increase in alcohol and cigarette products in 2005.  She claimed the compromise formula would bring in more additional revenue (at P4.5 billion in 2005) than HB 3174 (which will bring in P3.8 billion in 2005) (Cabacungan 2004a; Cabacungan 2004b).

Arroyo’s critics were not impressed.  Former Finance Undersecretary Milwida Guevara expressed

bewilderment at the effusive claims made by the Palace.  Guevara disputed claims HB 3174 would generate P26 billion in additional taxes in three years.  She calculated that the measure would only bring in P9 billion.  Apart from criticizing the failure to index tax rates with inflation, Guevara also complained about the retention of unevenly sized price tiers.  She claimed that the wide difference between the categories (P4.48 between medium-priced and low-priced brands, and P7.84 between high-priced and low-priced brands) induces manufacturers to misrepresent their products as ‘low-priced’ for a lighter tax burden.  She also noted that the ranges for each tax bracket (only P1.50 for medium-priced brands and P3.50 for high-priced brands) were uneven and arbitrary and “invite suspicion that they were tailored to ensure that favored cigarettes would be classified as either low or medium priced”.  She noted that this arbitrariness could explain the variance between tax and production shares.  More than half of cigarettes produced are low-priced; but since they pay only a tax of P1.12 per pack, they contribute less than 20% of total excise taxes collected on cigarettes.  In contrast, high-price brands that account for only about 30% of production, contribute about 60% to cigarette revenues (Guevara 2004; PDI 2004f).

The deficiencies of the House version of the ‘sin’ tax measure are absent in the counterpart Senate Bill 1815 proposed by

Senator Juan Ponce Enrile.  SB 1815 would do away with the four-tiered specific tax rate schedule and proposed a higher increase (a single tax rate of P13.50 per pack by 2010) so the sumptuary purpose of ‘sin’ taxation would be met.  In addition, the Enrile bill proposed earmarking 5% of revenues to fund cancer-related issues and another 5% to modernize regional hospitals in the country (Monsod 2004).  The committee report adopted by the Senate Ways and Means Committee chaired by Senator Ralph Recto provided for increases in ‘sin’ tax rates up to 2011 instead of just up to 2007 in the House version.  In the said committee report, excise taxes on tobacco products would increase by 30-112.5% in 2005 and by as much as 260% by 2011.  In a predictable response, the bloc of House members coming from tobacco-growing provinces defended the House version.  Rep. Eric Singson, acknowledged head of the Northern Luzon Alliance, vowed to fight the Senate version in defense purportedly of the tobacco farmers in his district (Romero 2004; Ubac and Pablo 2004).

What would make the pot boil over were allegations of a P1-billion lobby fund that may have flowed into the House to water down the ‘sin’ measure made by no less than Rep. Herminio Teves, vice chairman of the House Ways and Means Committee.  While Teves stopped short of categorically saying that his colleagues

were bribed, he noted that Fortune Tobacco would save a lot of money due to a lighter tax burden provided by HB 3174.  All the concerned parties, including Fortune Tobacco, dutifully denied the allegations.  Immediately, Teves revised his allegations and disclaimed knowledge of the lobby fund.  However, he continued to allege the existence of lobbying efforts over the ‘sin’ tax measure (Albano 2004; Balana, Avendaño, Cabacungan, and Nocum 2004; Pablo, Avendaño, and Labog-Javellana 2004).

[1] Section 6 of HB 2933 provides amnesty for taxpayers with pending tax assessment before the BIR. The person may avail himself of an amnesty equivalent to 10 percent of the basic tax assessed. Section 7 provides that taxpayers with a final and executory assessment and tax cases already pending before the courts are allowed to avail themselves of tax amnesty equivalent to 20 percent of the basic tax assessed, exclusive of interest, surcharges and penalties.

Through a rigorous analysis of the tax reform efforts of President Fidel Ramos (1992-1998), the tax policy process is revealed as a bargaining game between various veto players.  An accommodation of some sort is pre-ordained since even as the players have veto powers, everyone has an interest in making sure that a new tax policy emerges from the policy mill.  This is true for President Ramos who initiated the reform.  The desire to get the reform process going is also shared by legislators who, even if satisfied with the status quo, welcomed another opportunity to rewrite tax laws in order to secure divisible policy favors for constituents and supporters.  As a product of bargaining, the resultant tax laws were adulterated versions of their original versions and a mix of public-regarding (e.g., the expanded value added tax law) and private-regarding (e.g., the excise tax on ‘sin’ products law) policies.  The study of the tax policy process affirmed the propensity of lower-level legislators House members) to cater to special and private interests while the Senate was the natural ally of reforming President Ramos.  It also revealed the inordinate influence of several powerful individual legislators in tax policymaking.  The institutional players also included the Supreme Court, which at one point declared a tax law as unconstitutional.  This raised the transactions costs of tax legislation as a new and acceptable law had to be crafted.








President Fidel Ramos


The robustness of the conclusions and findings we had arrived at so far can be further tested if we change the decision-makers with the institutional parameters in place.  For this purpose, we examine in this section the tax reform initiatives undertaken during the presidency of Gloria Macapagal-Arroyo.  As revealed in subsequent paragraphs, this exercise would reveal continuities in tax policy and bolster our previous conclusions regarding tax policymaking in a candidate-centered democratic polity like the Philippines.


Arroyo’s tax reform initiatives evolved from her first term to the early months of her second term.  While the state of the country’s public finances was not in a pretty shape upon her take-over in January 2001, a greater sense of urgency was espoused during the start of her second term.  This was largely due to the alarm bells raised by a group from the University of the Philippines School of Economics (UPSE) [that included several former cabinet members from previous administration] who warned of an impending fiscal meltdown.  In her 2004 State of the Nation Address (SONA), Arroyo asked Congress to pass eight tax measures designed to raise some P80 billion in revenues.  However, Arroyo did not communicate a sense of necessity in this front.  She in fact did not replace her economic management team; in contrast, she appointed new men for the national defense and security portfolios.  The UPSE economists did a signal service for warning the nation of the fiscal dangers awaiting a polity that would continue to not fix its public finances.









President Gloria Macapagal-Arrooyo


During her first term, Arroyo initiated moves to reform the Bureau of Internal Revenue (BIR), the country’s premiere revenue collection agency.  The thrust of the reform was to convert the BIR into a corporate-like public organization that would operate (as well as rewarded and punished) under performance-based parameters.  Officers and staff of the new revenue authority were supposed to be paid at salary scales competitive to the private sector and shielded from political influence.   In her first SONA, Arroyo cited unprecedentedly the sitting BIR commissioner, a mere bureau chief, who spearheaded the reform effort.


An interview with Romulo Miral, Jr., then deputy director of the Congressional Planning and Budget Office (CPBO) at the House of Representatives, indicated the radical extent of the proposed BIR reform.  Miral, who was consultant to Bañez at the time, revealed that the plan was to abolish the BIR and establish a new and independent revenue body called the Internal Revenue Management Authority (IRMA) in its place.  None of the former officials and employees of the BIR were to be automatically or preferentially absorbed into IRMA.  There were plans to sub-contract private head-hunters to hire the officials and staff of IRMA and former BIR personnel had to apply with a screening board if they wanted to be employed by IRMA.   Anybody with a derogatory record was deemed ineligible for employment until her name was cleared.  IRMA officials and staff were to enjoy competitive salaries so quality personnel from the corporate sector could be attracted.  In addition, the pay and tenure of senior IRMA officers were to be linked with revenue collections (Miral 2004).   


Of course, the BIR officials and employees were against the planned reform.  At first, opposition to Bañez’ initiatives (including the transfer of revenue officials who had overstayed at a particular revenue district office to another locale) was confined to the filing of court suits. However, they obtained support from Courage, the left-leaning union of government employees.  The alliance between Courage and anti-reform BIR elements initiated a massive walkout and picketing at the BIR headquarters against Bañez. Almost immediately after this demonstration of popular resentment, he resigned in August 2002.  Bañez, who wanted to be able to fire corrupt and incompetent tax collectors, accused opponents of reform of stirring up trouble among the agency’s employees and undermining tax collection to thwart changes at the agency (MB 2002). President Arroyo admitted in her State of the Nation Address two weeks earlier in July 2002 that tax collections were running far behind target, while government spending is increasing as planned, so that chances are diminishing of reaching the 3% deficit target she had imposed for this year (Mendoza 2002). 


Arroyo could have clearly demonstrated her support for the embattled BIR chief and the IRMA reform by refusing to accept his resignation and supporting the IRMA reform.  However, the planned reform of the tax agency apparently found little support even among her chief allies.  The corrupt mafias within the BIR apparently sabotaged the reform effort by slowing down tax collections.  The drop in revenues was cited by reform opponents to call for Bañez’ resignation and no less than Speaker Jose de Venecia made the first call. 

Houser speaker Jose de Venecia

The speaker was seconded by other House members including Aniceto Saludo, Jr. (Southern Leyte) and Prospero Nograles (Davao).  Saludo even threatened to file charges of economic sabotage against Bañez for the poor revenue collections (Diaz 2002).  Notwithstanding President Arroyo’s optimism during her 2001 SONA, Bañez’ reform efforts apparently did not earn him friends within Congress, especially in the House of Representatives.  While House Bill 5054 calling for the establishment of a National Authority for Revenue Administration (NARA, a new name used in lieu of the much-maligned IRMA) was introduced, the measure languished in the House Committee on Appropriations (HOR 2003).  During the third and last regular session of the 12th congress, a similar measure (HB 6435) was also introduced.  While it fared better than HB 5054, it only managed to be reported by committee and did not pass the second reading stage.  In the Senate, a counterpart measure (Senate Bill 2463) was introduced by Senator Ramon Magsaysay, Jr.  However, the 12th Congress closed with SB 2463 pending in the Senate Committees on Ways and Means (headed by Senator Ralph Recto), Civil Service and Government Reorganization (headed by Senator Aquilino Pimentel), and Finance (headed by Senator Manuel Villar) (HOR 2004).


Miral (2004) explained the proposed BIR reform did not gain ground during the 12th Congress for several reasons.  First, the proposed reform was “mistakenly packaged” as either a ‘privatization’ or ‘corporatization’ of revenue collections.  Miral believed these were unfortunate labels that unduly raised alarums and red herrings among the affected parties.  Second, he noted that the authors of the IRMA measure (which included Speaker de Venecia, Rolando Andaya, Jr., Neptali Gonzales II, and Julio Ledesma IV) were actually not well versed in the technical aspects of the proposed agency reform.  Miral intimated that the less-senior champions of the reform, Reps. Florencio Abad and Joel Villanueva (a party-list representative) were the ones who seriously studied the IRMA proposal and even traveled to countries like Mexico and New Zealand that had reformed their revenue agencies

Rep. Joel Villanueva

(Miral 2004).  Rep. Florencio 'Butch' AbadBut they apparently could not offer much contest to the reform’s opponents.  After Bañez’ resignation, the reform was softened through a proposal to form a National Authority for Revenue Administration (NARA).  A key compromise was the inclusion of a ‘preferential absorption of BIR employees’ provision in the proposed NARA measure.  



During the same 12th Congress, other tax reform measures similarly rotted within the legislative mill.  At the end the second regular session, the status of measures to index and update so-called ‘sin taxes’ (HB 4765 and HB 5057) was reported as for ‘further Committee deliberation’ (HOR 2003).  During the third regular session, similar measures (HB 1728 and HB 4765) remained pending at the House Committee of Ways and Means chaired by Rep. Julio Ledesma IV (HOR 2004).  In contrast, measures that provided tax relief for several sectors and groups were either enacted into law or were approved by the House in third reading.  These included RA 9238 (which exempted certain services from the VAT), RA 9243 (which eliminated the imposition of the documentary stamp tax on secondary trading of financial instruments), RA 9294 (which clarified the tax exemption of offshore banking and foreign currency deposit units, authored by Rep. Exequiel Javier), HB 5713 (which granted tax incentives on capital equipment imports of new and expanding firms registered with the Board of Investments), HB 6344 (which restored the fiscal incentives to enterprises engaged in agriculture and fisheries (HOR 2004).