The private sector and civil society groups are the domain of voluntary exchange and volunteerism. In a competitive environment, people sell something, a commodity or service. If the price is good and attractive to many buyers and donors, sellers can prosper; if the price is high compared to quality, buyers and donors will shy away and sellers/providers can go bankrupt.
The government and state is the domain of force and coercion. People should not steal or damage/burn properties by others, people should not abduct, harm, shoot or kill others even if they have a valid complaint. The state will penalize them hard.
When the government coerces private enterprises to do mandatory services, to coerce price discounts and yet the state will not give a tax rebate for the decline in revenue and reduced profit, then the state abuses its coercive power and this will result in negative, unintended consequences to society.
In the Philippines, there are many new mandatory services, mandatory price discounts — on top of existing ones — proposed in Congress:
1. Mandatory maternity leave with pay for 100 days (HB 4113) or 120 days (SB 1305), parental leave with pay for adoptive parents, additional 30 days for solo mothers (same SB). It has passed the bicameral committee.
2. Requiring all employers to pay their employees a 14th month pay (HBs 402, 3815 & 8095).
3. Security of Tenure (SoT) bill (SB 1826) aka Anti-ENDO bill, certified as urgent by President Duterte.
4. Granting bereavement leave of 10 working days with pay to employees on death of an immediate family member (HBs 4071, 6043, 6581), or five working days with pay (HBs 5711 & 6119).
5. Expanded students’ 20% fare discount (SB 1597) – to become year-round, to cover all Filipino students from elementary to college and in technical-vocational schools, to apply even during weekends, holidays and sem break, and cover all means of transportation from buses, jeepneys, taxis, tricycles, transport network vehicle services (TNVS), MRT, LRT, to airlines and passenger ships. The Senate has passed this bill on third and final reading.
Proposal #1 will lead to less hiring of women in the formal sector, so more women workers will be relegated to the informal sector where multiple labor and related laws are often not enforced.
#2, #3 and #4 will lead to less hiring of workers, men and women, and more employers will use more machines, robots and AI in work that are generally repetitive. Their customers demand stable or cheap prices so they must cut costs somewhere. Employees already have vacation leave, sick leave with pay of 15 working days each, maternity leave with pay of 60 days, etc.
#5 will lead to higher fares in land, sea and air public transportation. Since there will be many students, senior citizens, and persons with disabilities that must be given 20% discount all year round, the fare of non-students, non-senior citizens must rise to compensate for reduced revenues.
Again, those proposals are on top of existing mandates and forced price discounts. These will further raise the cost of hiring people so companies will either hire less people and use more machines and unemployment can rise. Or some companies will dishonor those new laws and bribe labor inspectors instead as government corruption remains high until today.
The Philippines also has high corporate income tax (CIT) compared with many neighbors in Asia. Tax competition is very real as many countries and economies further reduce their CIT to attract more investors and make them stay.
The TRABAHO (aka TRAIN 2) bill in Congress, if enacted into law, intends to remove many fiscal incentives by 2019 but will reduce CIT from 30% to 20% by 2029. Sigurista.
Since the country’s business competitiveness will be adversely affected by those mandatory welfarism by private enterprises, the government should compensate by having a deep tax cut in CIT. An 18-20% starting 2019 will improve our competitiveness.
Bienvenido S. Oplas, Jr. is the president of Minimal Government Thinkers and a Fellow of Stratbase-ADRi.