(I owe this post and article to a Filipino friend who is now based in Canada. I did not post it immediately because I was hoping that local media would pick this up and reprint it. I don't know if media did pick it up and I missed their issue or maybe media decided that it was not worthy of print space at all. But I agree with my friend who is still very much concerned about what is happening in our country. Capital flight is a serious matter that perpetuates poverty and must be resolutely addressed and curtailed. I think President Aquino should rethink his slogan "Kung walang corrupt, walang mahirap". It is not just corruption that causes poverty but greed and legalized economic injustice as well.)
Corporate tax evasion undermines Philippines remittances
Money headed for international tax havens almost cancels out the $23 billion overseas workers contribute
Jonathan Manthorpe, Vancouver Sun
Published: Monday, December 19, 2011
The Philippines' army of 10 million overseas workers is renowned for the sup-port it gives the country's economy with remittances sent home and expected by the World Bank to reach $23 billion this year.
But a new report suggests that support is being substantially undermined by the illegal and illicit export of close to $15 billion a year by the Philippines' wealthiest corporate leaders.
This outflow, says the Washington-based research and advocacy organization Global Financial Integrity (GFI), is seriously affecting the Philip-pines capacity to develop its economy and infrastructure, and sustaining one of the worst disparities in Asia between the rich and the bulk of the population.
The GFI report published on Thursday looked at the decade from 2000 to 2009 and calculated that about $142 billion left the Philippines during that period.
"The study found that the majority of the illicit out-flow, $113.7 billion, is due to the mispricing of imported and exported goods," says the report.
Corporations and individuals have been smuggling money out of the country, usually to avoid taxes, by manipulating the price and quantity of exported goods.
The aim is to send more money abroad than is reported to government and then park the money in tax havens or overseas investments.
"This means that while the Philippines has seen significant outflows from corruption, bribery, and kickbacks, their biggest priority when addressing illicit capital flight should be to tackle trade-related tax evasion," says the report.
"We believe that the very real cost in human suffering and loss of life from tax evasion in the Philippines and elsewhere throughout the developing world, is massive."
If the GFI analysis is any-where near accurate the irony is profound.
The Philippines has enormous potential, but suffers from a political system and succession of administrations still steeped in the quasi-feudal culture of the Spanish colonial period.
At the same time, the Philippines has among the most literate and highly educated populations in Asia. But millions of Filipinos find it impossible to use their skills at home and are driven to find work abroad in order to support their families. This compulsion has led to the creation of an extraordinary sup-port network for the 10 million or more Filipinos working over-seas as domestic helpers and caregivers throughout North America, Europe, Asia and the Middle East. And at sea Filipinos are dominate members of the crews of merchant ships worldwide.
A World bank report at the beginning of this month estimated the overseas Filipinos will send home $23 billion this year. This is higher than the Philippines government estimates of $20.1 billion and, despite the global economic stagnation and uncertainty, seven per cent up on last year.
But while this army of Filipinos is supporting the home economy, the GFI report says this effort to spur prosperity and development is being undermined by the export of money by corporate leaders.
While the Philippines has seen substantial economic growth over the past decade, much of these gains have gone to relatively few people.
Income inequality has risen since 2000 and is among the worst in the region.
The movement of money out of the country by the wealthy "helps explain why despite economic growth, tax revenue as a percentage of gross domes-tic product has been declining since 1990," says the GFI report.
The report says the Philip-pines cannot solve its tax evasion problems by itself. The shadowy system of tax havens and loose accounting systems used by corporations and individuals to hide money abroad is international in nature.
"The international community, namely the G20 countries, needs to support new transparency measures such as country-by-country reporting so that multinational corporations will report revenues and costs for their network of subsidiaries in each individual country," says the report.
jmanthorpe@vancouversun.com
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