Martial Law @50: Continuing quest for social justice and freedom from poverty
The maturity of a nation, it has been said, can be gleaned from how its people treat its painful past -- with brave acceptance of what happened and a strong conviction to prevent it from happening again.
However, an overwhelming number of Filipinos (31 million) have recently decided that the pain the country suffered during the dark years of martial law is no reason to prevent the election of the son and namesake of its perpetrator. And this after the election of Rodrigo Duterte, who exceeded the elder Marcos in brazen violence. Many have tried to come up with a suitable description for the behaviour: collective amnesia, social denial and dissonance, masochism, even sheer stupidity.
Exactly 50 years ago on September 23, 1972, the ousted dictator Ferdinand Marcos Sr. announced on television that he had signed Proclamation No. 1081 earlier in September 21, putting the Philippines under military rule.
That regime would last for ten gruesome years, with waves of torture, extrajudicial killings, and other appalling human rights violations against ordinary citizens. Amnesty International estimates that about 70,000 people were imprisoned, 34,000 were tortured, and over 3,200 were killed outright.1 Hundreds of desaparecidos, people who were abducted by state actors, were never seen again dead or alive by their families and loved ones.
Marcos apologists and paid trolls however are quick to point out that these atrocities are necessary payment for the economic “golden age” at that time. The purported golden age however is a methodical disinformation, churned into chewable fake news and used effectively in May 2022 election.2
From 1972 to 1985, the average annual gross domestic product (GDP) growth rate was 3.4 percent, and the per capita GDP grew every year by less than 1 percent. In contrast, the average annual GDP growth from 2003 to 2014, despite the political chaos, was 5.4 percent.3
But why would such a thing happen under the watch of a brilliant Marcos? Because the economy under him was suffering from a post-war recession and the response was largely to secure foreign loans that financed ambitious big-ticket projects with huge percentage of kickbacks going to his cronies that eventually ended in his own pocket. With debt as foundation, that economy started to tumble like a house of cards in 1982, crashing in 1985 when the government could no longer pay its debt obligations.4 And just like what recently happened in Sri Lanka, what ensued was debt crisis, unemployment, untold poverty, and even famine.
For many of the surviving victims of Marcos’s martial law and their loved ones, justice and reparations remain incomplete. On February 25, 2013, the late former President Benigno “Noynoy” Aquino III signed the Human Rights Victims Reparation and Recognition Act, or Republic Act 10368, which created the Human Rights Victims’ Claims Board. When the claims board ended in 2018, it received over 75,000 claimants. Unfortunately, the board assessed that only around 11,000 fully met the requirements to claim reparation, which was sourced mainly from the Marcoses’ ill-gotten Swiss deposits.5
Some tried to have a new law enacted to include other martial law victims who failed, for various reasons, to make it on the successful list of claimants in 2018. But in 2019, former President Rodrigo Duterte made a series of statements contrary to Supreme Court ruling6 alleging that the elder Marcos did not amass ill-gotten wealth from his long rule. The effort for additional reparations is now in limbo, if not totally impossible.
After half a century, the declaration of Martial Law has come full circle: all-time high oil price, record-breaking weak peso coupled with a dwindling dollar reserve which is being drained by debt payment and imports. There is twist to the circle however-—the son and namesake of its perpetrator is now sitting as president. History sometimes could be so cruel.
And the question has to be asked again: Why did Filipinos, including many workers, vote for another Marcos?
There is more than a few answer to such an enigma. But for this piece, suffice it to say that the ousting of the Marcos regime was an incomplete project. Except for Cory Aquino, Fidel Ramos, and Benigno Aquino III, all succeeding presidents, from Joseph Estrada to Gloria Macapagal-Arroyo and to Rodrigo Duterte were proved to be Marcos allies. The Marcoses, except for few years, never lost their grip to power.
1Amnesty International. (2018). Philippines: Restore respect for human rights on 46th anniversary of martial law. Public statement.
2Salazar, C. (2022). Marcos leads presidential race amid massive disinformation. Philippine Center for Investigative Journalism.
3De Dios, E. (2015). The truth about the economy under the Marcos regime. Introspective. Businessworld. 16 November 2015.
4Montesa, AJ. (2022). The economic legacy of Marcos. Yellow Pad. Businessworld. 6 March 2022.
5Amnesty International. (2022). Five things to know about Martial Law in the Philippines.
6Aguinaldo, C. and Balinbin, A. (2019). Duterte signs law extending use of ill-gotten wealth for human rights-abuse victims. Businessworld. 28 February 2019.
Gig delivery riders: Workers or independent contractors?
The Covid-19 pandemic saw the rise of digital platform workers who were mostly invisible in normal times. The new workers in the digital economic universe -- commonly called platform or gig economy -- became essential workers providing the needed services when the pandemic locked down people inside their homes.
“Gig” work has come to mean small, temporary, and time-bound service jobs based on digital software applications. With the increasing technological advances, platform-based labor emerged from the practice of outsourcing, in which businesses decreased in-house labor by assigning tasks to service providers.
Businesses operating within the gig economy manages three components:
(1) platform labor, termed as “independent contractors”,2 paid by the gig (i.e., tasks, services, projects);
(2) consumers who have specific service needs (a ride or delivery of items); and
(3) companies with app-based technology platforms connecting workers and consumers.1 Prominent platform-based companies include Food Panda (German), Uber (US), Grab (Singapore), and Lalamove (Malaysia), to name a few.
Unlike workers who are legally entitled to mandatory statutory benefits provided in the Philippine Labor Code and other labor regulations, platform-based workers are generally classified as “independent contractors”. The lack of employer-employee relationship is a bone of contention between platform workers and platform-based companies.
However, many gig workers have defied and resisted the non-recognition of employment relations and won battles for labor rights and benefits in other countries. The most celebrated was the UK Supreme Court ruling recognizing Uber drivers as “workers” of Uber entitled to employment rights including minimum wages and vacations.3
In the Philippines, Food Panda and Lalamove delivery riders have since 2020 organized gig riders’ protests, including “wildcat protest rides”, against inhumane work conditions, low wages, and lack of benefits, and protection particularly during the pandemic. Working at the frontlines, delivery riders are directly exposed to health risks, amplifying their vulnerabilities due to lack of social protection, job security, and labor rights.
The rising protests from delivery riders pressured the Department of Labor and Employment (DOLE) to issue the Labor Advisory No. 14 series of 2021, entitled “Working Conditions of Delivery Riders in Food Delivery and Courier Activities”. The advisory, however, was non-committal whether delivery riders and/or gig workers are employees or independent contractors.
DOLE instead advised the application of the “four-fold test”, a sort of economic reality check, to determine if an employer-employee relationship exists.4 The four-fold test are: (1) selection/hiring of worker; (2) payment of wages; (3) the power of dismissal; and (4) control test. Control test is the most crucial in determining employment relationship -- whether the employer/company has the power to control the result of the work, as well as the means and methods to accomplish the work.
More contentions around these issues are bound to emerge in the next years.
Gig workers seeking recognition as employees rather than independent contractors are thus advised to bring their demands to labor courts. The successful case of Food Panda delivery workers in Davao may become a positive precedent in establishing employment relations for delivery riders and gig workers.
In this case, the National Labor Relations Commission (NLRC) Regional Arbitration Branch in Davao ruled that Food Panda Philippines committed illegal dismissal and ordered the company to pay the dismissed workers Php 2.24 million. The amount covers back wages, including 13th-month pay, leave pays, and separation pays for the affected delivery riders.5 These are guaranteed labor benefits for workers under the Labor Code.
The next step is to push for a law that clarifies and regulates the terms and conditions of employment of delivery riders and gig workers. Ultimately, of course, this legislative pathway will still rely on how far platform workers can consistently collectively organize and mobilize.
Verna Dinah Q. Viajar is currently a Postdoctoral Doctoral Research Fellow of the Rosa Luxemburg Stiftung Berlin and Visiting Research Fellow at the School of Labor and Industrial Relations, University of the Philippines Diliman. She is also a research fellow at LEARN.
1See Istrate, E.& Hariss, J. (2017). The future of work the rise of the gig economy. Retrieved from https://www.naco.org/featured-resources/future-work-rise-gig-economy
2See Samson, M. (2021). “Workers’ Rights in the Philippine Gig Economy”. Asia Business Law Journal. Retrieved from Workers’ rights in the Philippine gig economy. Asia Business Law Journal.
3See Frantz, E. & Cuk, R. (2021). “Why Uber’s Loss is a Win for Labour Rights”. Open Society Foundations. Retrieved from Why Uber’s Loss Is a Win for Labor Rights - Open Society Foundations.
4See Samson, M. (2021). “Workers’ Rights in the Philippine Gig Economy”. Asia Business Law Journal. Retrieved from Workers’ rights in the Philippine gig economy. Asia Business Law Journal.
5See Cantal-Albasin, G. (2022). “NLRC orders foodpanda to pay 7 dismissed delivery riders in Davao”. Rappler. Retrieved from NLRC orders foodpanda to pay 7 dismissed delivery riders in Davao (rappler.com).
A marginal tax for ultra-rich to uplift poor (Part 2 of 3)
In Part 1, we proposed a 3% wealth tax to end Philippine poverty, noting that it would be reasonable given the wealth and profits of the country’s richest. Moreover, a fair wealth tax schedule can be adopted following the concentration of wealth in the country. In this part, we seek to demonstrate that a wealth tax is feasible by showing how to address technical and political obstacles.1
As with any tax, a primary obstacle is tax evasion. This can be mitigated by knowing how much exactly a rich individual owes the government.
Unlike income, the government has little information on the individual wealth of the richest families, except perhaps the non-triangulated data on the ownership of firms available to the Securities and Exchange Commission (SEC), and the still-messy cadastral data from the Land Registration Authority (LRA). We usually rely on private lists such as that published yearly by Forbes magazine, which may not be able to capture true wealth accurately, limited as they are by resources.
One way to overcome this handicap is to require everyone with a net income (as reflected in the Income Tax Return or ITR) above a certain amount to file a Statement of Assets, Liabilities, and Net worth (SALN), similar to those required of government employees. We can assume a threshold of capital-to-income ratio of 5:1, meaning, given the wealth tax schedule we previously proposed, citizens with an annual income of ₱10 million will be assumed to own ₱50 million and therefore asked to submit a SALN. If the SALN reports a net worth that reaches the threshold of ₱50 million, then the individual will now be required to pay a wealth tax.
In addition, given the volatility of valuated wealth, we also propose the use of the 12-month average of net worth as a basis for the wealth tax, rather than a mere snapshot before the deadline. This is also to prevent actions to artificially deflates one’s net worth just before the tax assessment period.
Given the predisposition to tax avoidance, SALN alone, even if audited, will not be sufficient. To augment the state’s capacity to ascertain the true net worth of individuals as declared in their SALNs, agents of government, specifically of the Bureau of Internal Revenue (BIR), must have full, unimpeded access to the information from the banking, stock exchange, and other securities exchange systems. This requires the amendment of Sections 22 and 33 of Republic Act 1405, or the Bank Secrecy Law.
A wealth tax also risks capital flight. To address this, some countries with a wealth tax have also opted to impose a 25% “exit tax”. We can also do so for those who will bring capital out of the country by renouncing their Filipino citizenship,4 provided that the net worth of the person is within our wealth tax brackets. There would be few problems with regards to real property and physical investments which cannot be “exported” and can be expropriated. The BIR can confiscate properties in lieu of tax payments. The exit tax targets financial capital.
The possibility of estate planning, or outright tax avoidance, also requires a response, given that the rich conduct informal dealings with relatives and employees to hide their assets, or to reduce their position in the wealth tax brackets. These dealings, however, can only be made through transactions such as gifts, inheritance, or other transfers mediated by the financial system.
In our proposal, assuming full transparency and strong surveillance over all financial transactions and legal bequests, the state can treat such transfers as “exit” from the asset and charge a 25% levy. Note that this effectively reverses the reduction of the estate tax in TRAIN 1, from 20% to 6%.5
But the only way to sustainably mitigate the risk of “capital flight” is to promote international cooperation on taxation wherein all countries of the world agree on a common wealth tax rate, as proposed by French economist Thomas Piketty.6 Otherwise, capital markets will attempt to punish countries that will attempt to impose a wealth tax, similar to what commodity markets do to countries that refuse to participate in free trade agreements.
As worldwide movements push for an end to austerity, the Philippine government should support a global call for a common wealth tax. More urgently, we can call for the creation of an ASEAN Wealth Tax Union, which will also be a negotiating forum for a regional-level wealth tax schedule appropriate to the national level of capital and investment flows. This is with the end goal of eventually securing intra-regional wealth tax agreements.
In the meantime, the Philippines can push for the automatic sharing of all information on financial transactions as a conditionality for participating in all present and future economic agreements, especially the ones on trade.7 This information will go a long way in the correct assessment of the net worth of the economic elite, and will strengthen the case of the governments of the world in imposing a common wealth tax.
James Miraflor is a fellow at LEARN.
1Of course, this is with the understanding that political balance of forces is such that citizens can pressure Congress to enact a wealth tax, even as the vast majority of representatives will likely be affected by levies on huge assets. Excluding the outright exemption of politicians to wealth taxes (an untenable proposal), this isn’t something that can be addressed by the wealth tax design.
2“All deposits of whatever nature with banks or banking institutions in the Philippines including investments in bonds issued by the Government of the Philippines, its political subdivisions and its instrumentalities, are hereby considered as of an absolutely confidential nature and may not be examined, inquired or looked into by any person, government official, bureau or office, except upon written permission of the depositor, or in cases of impeachment, or upon order of a competent court in cases of bribery or dereliction of duty of public officials, or in cases where the money deposited or invested is the subject matter of the litigation.”
3“It shall be unlawful for any official or employee of a banking institution to disclose to any person other than those mentioned in Section two hereof any information concerning said deposits.”
4Sen. Warren proposes 40% in her own wealth tax proposal.
5This has actually resulted in foregone revenues of hundreds of billions of pesos, since the death of Henry Sy, Sr., George Ty, John Gokongwei, Jr., Lucio Tan, Jr., and Danding Cojuangco all conveniently falling after the effectivity of RA 10963.
6He proposed a wealth tax such that the rate of return on wealth $r$, is less than or equal to the growth rate $g$. This is to neutralize the powerful economic forces favoring accumulation.
7The Ricardian theory of comparative advantage rests on the assumption of capital immobility across nations, as capital is reallocated within the nation to allow for the restructuring in the allocation of factors. Without capital immobility, capital can simply leave countries which won’t have any resources left to reallocate. A common wealth tax reduces capital mobility, allowing nations to build sectors in a strategic manner.