Tax justice to deliver essential public services, not PPPs! Asian Peoples Movement on Debt & Development

Philippines, social service gaps  Health costs are still largely out-of-pocket (up to 57%)  More than 50% of public hospitals characterized as no more than “infirmaries” (2009)  Around 1 hospital bed per 1,000 population against the World Health Organization standard of 20  Maternal mortality rate at 163 per 100,000 population, missing the MDG target of 52.

Education  Continuous decline in the education budget from a high of about 30% of the national budget in the 50s to only around 15% (2013).  Education spending from the post-Marcos years up to the present is yet to reach the 6% of GNP UNESCO Delors standard

Government Spending for 2015 Source: 2015 Budget of Expenditures and Sources of Financing cited in (Freedom from Debt Coalition)

Public-Private Partnerships as a “solution” to inadequate resources for public service provision  Offered to investors:  Financing thru direct government appropriations and ODA funds  Guaranteed return of investments  Use of public sector assets by investors to pay capital costs, debt services and operating expenses  Inflation and foreign exchange cover provided by government (through price escalation clauses)

Water privatization, Metro Manila  International Finance Corporation – drafted the water privatization plan for the Metropolitan Waterworks and Sewerage System (MWSS)  1995: Turnover of MWSS' service operations to two private concessionaires  Hailed by the World Bank as the largest water privatization undertaking in Asia  ADB: “role model for future large-scale projects in the Asia- Pacific Region”.

Promises made  Lowering of water rates  Uninterrupted water supply  Compliance with WHO standards within 5 years  100% water service coverage within 10 years  US$7.5 billion in investments for new infrastructure  US$4 billion in corporate and income tax revenues over 25 years

Promises broken  Non-payment of concession fees – at least $36.9 M still owed to MWSS  Thus the need for government bridge financing of maturing obligations of MWSS amounting to more than $400 million in loans to avoid a default  $3.1 B corporate income taxes of MetroManila’s water concessionaires shouldered by consumers since 2008  Below national drinking water standards  Rising water rates – now in the top five highest average water tariffs among major Asia-Pacific cities  Unmet expansion targets (especially in urban poor communities)

Energy  State’s private sector participation contracts with Independent Power Producers contained:  “Take-or-pay” provisions –regardless of capacity needed or produced  Fuel cost guarantee  Absorption of exchange rate fluctuations  Resulted in more borrowings of $600 M from ADB & JBIC  The Philippines’ electricity rates counts among the top five highest residential tariffs in Asia

PPPs as “main engine for national development” – Aquino administration ( Medium-term Philippine Development Plan, )  Income Tax Holiday of 4 – 6 years  Additional deductions for labor expenseS  Tax and duty exemption on imported capital equipment  Tax credit on domestic capital equipment  Tax credit for taxes and duties on raw materials  Exemption from taxes and duties on imported spare parts  Exemption from wharfage dues and any export tax, duty, impost & fees  “Regulatory guarantees” - guaranteed payments and adjustments if court orders, regulatory agencies, or even legislation affect business profits

Illicit Financial Flows, Philippines ( ) (In millions of US dollars, nominal) (Kar and Spanjers, Illicit Financial Flows from Developing Countries: ) YearAmount 20038, , , , , , , , , ,157 Cumulative93,494 Average9,348 PPPs are rationalized by inadequate resources… Yet resources are draining away, largely from the tax dodging practices of multinational companies

Revenues are lost as well in incentives to MNCs  At least 1.5% of GDP or PhP144 billion – estimated revenue loss due to income tax holidays, and lower income tax rates and duties.  Translating to  9.3% of government expenditures  10.6% of government revenues (Department of Finance, 2011)

TAX JUSTICE! Not PPPs or any other form of privatization of essential services, nor dependence on aid and debt  To raise revenues for the state to fulfil its obligations, which include delivery of adequate, affordable, quality essential social services. Its ability to meet these obligations is affected by its capacity to raise revenues.  For the state to effectively and efficiently enforce tax policies that are just and progressive along with other programs and policies that strengthen the domestic economy and the country’s internal capacity to provide for its own finance needs.  So South governments are able to move away from resorting to borrowings and depending on aid.