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Sen. Ralph G.

Recto's Sponsorship Speech on the Proposed 2012 General Appropriations

November 15, 2011

Mr. President:

Before I dwell on some specifics of next years budget, let me take a great leap backward and
discuss some details of the national budget 100 years ago.

Although a century separates 1912 and 2012, the issues they confronted then are the same ones we
are confronting now.

The national narrative remains unaltered, even in the field of expenditures, that while todays budget
sports a lot of zeros, the purposes for which they were appropriated then still exist today.

In 1912, total expenditures reached P30.2 million, which is what our government intends to spend in
8 minutes next year.

100 years ago, the education sector can operate on a P3.6 million annual outlay, an amount which
can barely build six classrooms today but sufficient then to run 3,396 schools, pay the salary of a
teaching corps of 8,360 and construct 135 schoolhouses.

100 years ago, the public works budget was P4.39 million, which already included the paving of 291
kilometers of road, but is what we spend today for the reblocking of a postage-stamp -size span in

Total capital outlays in 1912 was P8.35 million, an amount which would send a congressman into
tantrums today if that is whats given him as first tranche of his budgetary earmarks.

While the ledger of government disbursements in 1912 featured miniscule amounts by todays
standard, the uses for which they were released were the same as todays: Solving the Moro
problem, eradicating mosquitoes, ending the classroom shortage, promoting rice independence,
plugging tax leakage, among others.

If the 2012 budget has allocation for interest payments, so did its 1912 ancestor, but a measly
P1.425 million.

The continuing past is also evident in the way the budget was acted by the legislature .If you think
that reenacted budgets are a latter-day phenomenon; the 1912 budget was a reenacted one due to
the failure of the Philippine Assembly to pass one for that year.

If you think that 21st century annual budgets suffer from devaluation on account of population
increase and inflation, the 1912 budget was smaller too by P10,000 in real terms over the 1911

But on one score, the 1912 budget was superior to its 2012 descendant, and that it was premised on
a surplus, as revenues realized were P31.2 million, which was P1 million higher than expenditures.

While the Bureau of Customs today plays second fiddle to BIR, 100 years ago it was responsible for
58 percent of total collections as compared to internal revenues equity of 30 percent.

And in that age of the abacus, it cost P3.06 to collect P100 worth of taxes.

The composition, however, of some aspects of the revenue effort a century ago hews to
contemporary fiscal contours.

For example, personal vices financed the virtues of American-style governance. Wines, liquors,
cigars and cigarettes combined for almost P9 million of total revenue take of P31.2 million.

Sin taxes accounted for almost 30 centavos for every peso that was remitted to the public coffers. In
contrast, banks chipped in less than 1 percent, which would shed light on the DNA of this sectors
legendary parsimony.

Mr. President:

I intentionally made a detour to this memory lane to drive home one point that is constant in
appropriating funds. Whatever the era, whatever the form of government, budgeting is bound by this
set of rules:

That appropriation is a mere downstream activity of revenue collection. That it is taxation, which
makes appropriation possible. Those expenses are always pegged on income. That the privilege to
spend springs from the duty to collect taxes.

Yes, the budget presented to us today is a catalogue of expenditures. But because too often big
numbers mesmerizes us, we seem to overlook the important fine print, that every peso that will be
spent will be collected from the people. Though the budget contains the price tag of projects it
doesnt state who the payer is, which is the taxpayer because whatever peso we will put in his
pocket we actually pick from his pocket first.

And yet, the legislative tradition is that when it comes to the appropriations bill, we only sponsor and
highlight the expenditures. We seldom sponsor the revenues it would entail.

It could probably be because of a political culture, which has led our people to demand pork on their
plate without giving a hoot on how the pigs are raised and butchered.

So today, Mr. President, let me break from tradition, and, instead of delving on the spending
side, walk you instead through the revenue underpinning of this budget, because the projects,
activities, programs therein can only rise on the scaffolding of taxation.

Doing so, Mr. President, would likewise give us a better appreciation of the revenue-appropriation
dialectics so when the temptation to finance new spending arises , we will be reminded that
budgetary intentions are always tempered by revenue limitations.

Before I proceed let me acknowledge the Finance team, the Customs and BIR people who are here.

They are the people responsible for raising the billions in this budget, and for translating our
campaign rhetoric into reality.

Because in the division of labor in appropriating money, while it is the Budget people who get the
credit, it is they who must raise the cash.

And how much must they raise next year? P1.816 trillion a year or about P4.98 billion pesos a
day lang naman. If government were a taxi, theyre the designated payer of the P207.5 million-
meter charge per hour.

Of the P1.816 trillion, the revenue portion is P1.568 trillion. Yung balanse na P286
billionang deficit, ibig sabihin uutangin.

Of this financing requirement, the Bureau of Internal Revenue has been assigned a goal of P1.066
trillion and the Bureau of Customs P365.1 billion. Non-tax revenues such as fees and charges (P63
billion) and Treasury income (P69 billion) will put in an additional P138 billion.

Thus on daily basis, Kims army must raise P2.92 billion while Ruffys fiscal stevedores must haul in
P1 billion.

And that, Mr. President, is a hard job to do in a political culture that sees spending taxes as a
virtue, but collecting them as a sin; which treats their evasion as a duty, but their imposition a crime

The fact is, we have begun to treat taxes as text promos: we want to pay little for unlimited services.

And that thinking has even infected many of those in government whose concept of good
governance is to grant as many tax breaks to as many people.

One example of this is the grant of P44.8 billion of incentives to BOI and PEZA of which an
estimated P26 billion are redundant.

Mr. President:

The DoF secretary has vowed to raise an additional P171 billion next year from BIR and BOC
alone. BIR s 2012 target is P126 billion bigger than this years level while BOCs hike in collection
quota is P45.15 billion.

Of the P171 billion projected increase, P128 billion will be attributed to economic growth while about
P40.5 billion will accrue from tax administration measures.

The latter includes the drive to make honest men out of taxmen through various transparency,
integrity and anti-corruption measures.

This is good because the law only says we must pay taxes. There's nothing in the tax code that
says that we must leave a tip or pay extra for good service. Good performance at work, after all, is
not VAT-able.

If this is the tack to be taken, then our taxmen might consider looking into the ratio of tax burden to
sales of major industries, which is below the accepted curve.

For example, the petroleum industry pays a tax VAT, percentage, excise etc. included of 11.8
percent out of its gross sales, which is below the 12 percent VAT which is the biggest fuel additive

The power sector pays a total tax of 7.34 percent, despite the fact that our monthly electricity bills
are peppered with 12-percent VAT charges.

The car industry pays a gross tax of 8.83 percent, yet a VAT is automatically tucked in all vehicle
sticker prices.

Telecoms that posted sales of P237 billion last year had a tax burden of 12.46 percent, which is a
whisker above the VAT benchmark.

Instead of trying to liposuction more taxes out of plastic surgeons, the BIR may wish to focus on
these industries considering that when it comes to the oil sector it has to deal with 21 returns only,
20 in telecoms, and 58 in power.

Each of these corporations has become revenue agents of the government. Tax paid by the
consumer on every phone call made, every liter of gas bought, every gallon of water flushed down
the toilet are paid to them and not to the BIR. Businesses are supposed to breathe through tax
loopholes. But let it be through their own tax obligations and not thorough tax payments simply
coursed through them.

Mr. President:

What we see in this budget are columns of expenditures but if we view them from the prism of taxes,
we might fully grasp the real value of each, appreciate the sacrifices made by taxpayers, and
embrace the need to properly spend them.

For example, the projected individual income tax payments in 2012 of P222 billion will only be
enough to pay the salaries of DepEd employees and the benefits of the government employees who
will retire next year.

In fact, if you combine individual income tax payments with the projected corporate income tax
payments of P364 billion, the sum is still P7 billion short of the total PS requirement of P593 billion
for 2012.

Our payroll burden now runs at P1.56 billion a day.

BIRs forecast excise tax collection of P56 billion from both alcohol and tobacco will just be used to
pay for the pension of soldiers, policemen and other uniformed personnel pension which is pegged
at about P54.5 billion next year.

Taxes from mining activities in the amount of P1.8 billion will just be used to cover representation
expenses of P1.73 billion.

Taxes from automobile sales of about P2.9 billion is what the DOTC will spend in about one month
and three days in 2012.

If we will spend all BIR collections from VAT in 2012 P226 billion in education it can run public
elementary and high schools but only half of the state colleges.

All import duties to be paid in 2012 would only be equivalent to 10 months budget of the DPWH that

All excise tax collections of the BoC from gasoline, liquor, tobacco, vehicles in 2012 can only
finance five and half months of DWSD operations.

Mr. President:

As Ive said, every expenditure carries a hidden fiscal cost. If our people are informed of the taxes it
would take to finance mundane public projects and services, it may lessen their agitation for more of
these and demolish the myth that the Senate is like a public mint that can print money or a souped
up Wowowee show of 24 genies who can give them what they want.

The fact is that:

It would require the excise tax payments on 1,362,397 bottles of locally distilled rum to finance the
concreting of one kilometer of road.

It would require the excise tax on almost 2 million sticks of Winstons to fund the construction of one

To buy a police car, government must collect the excise tax on the full tank of gas of 45,977

And to pay for the basic salary of one teacher for one year alone, the tax on 543,000 packs of
noodles would have to be collected.

And who will pay for all of these? Not Malacaang, neither the Senate, nor the House, but the
people themselves, those whom we represent. Sila na mga boss natin.

Mr. President:

In closing, let me remind our friends from the executive branch who are here today that the budget is
meant to be executed because monies collected from the people for the people are meant to be

If the budget is the book of tax rebates them let us allow our people to enjoy the dividends of their
tax payments. Tax paid promptly must be spent promptly.

I understand that holes in the spending pipelines must be plugged first before the taps are fully
opened. I am, however, sure that after 500 days; the patching up has been finished.

Because if funds would still flow in trickles, then I would be tempted to join those who are clamoring
that the finance managers be canonized en masse as apostles of austerity.

Hopefully, the initial disturbing drift toward a kind of parsimony that harms the public more than it
helps them will now stop. Otherwise, some agencies may need laxatives to coax more funds out of

My friends, reporting a surplus created out of withholding services and strangling infrastructure work
can never be a fiscal virtue.

On the contrary, it is anti-progress because funding delayed is development denied.

Mr. President:

I thank you for bearing with this unconventional sponsorship of mine. I do believe that a holistic
appraisal of the bill before us entails the presentation of the other side of the budgeting coin, which is

I urge my colleagues to pass this budget.