Rare Periodicals

The Bell Report – an analysis

Media

Part of The Manila Guardian

Title

The Bell Report – an analysis

Creator

Fernandez, Jose B., Jr.

Language

English

Year

1950

Subject

Taxation.

Bell Mission.

United States.

Rights

Fulltext

November, 1950 TIIE MANJLA·GUARDIAN Page 9 tHE- BELL REPORT - AN. ANALYSIS By Jose B,' Fernandez, Jr. The Philippine Bank of Commerce . . ~ HJ1: 24.man Bell Mission, _after more_ than a month's stay . made the. base. In other words, on the basis of approximate· ·~ in Manila, has ·made a searching analysis of the economic ly · $300,000,000 ·earned last year on account of the exports as .. well as the soda! problems confronting the young Re- of goods and services, -the $?0,000,000 aid. represents an anpublic and has recommended a 7-point program. The .first nual ii;icrease in dollar availability of ·16 percent to the eco'.six: recommendiitjons repr,esent the l\1ission's idea of tile Self· nomy. 1 , - help measures which the Philippines can and should at this Although the figure then does not appear. as large as ~e undertalte: The seventh recommendation indicate!i an ECA aid ha~ pfoportionatel:v for certain European coUntrles, ~t.ial ,figure of $250,000,000 .which the Mission believes, it asswnes much more significance when related to the amount should be Aml!rica's material contribution to the overall pro- of capital goods importations both in 1949 ~nd in 1950. During . gram. this period, bnportation of cApital goods h.ad been proceed· . That the Mission explicitly conditions the aid on steps .. ing at .approx;matelv a $50.000.0QO per year rate. Should <ibein~-taken to achieve interiial reform and the necessary the contemplated aid ·of. $50,000,000 per y-ear be earmarked sacrifice involved in a program of self-help, is not particularly purel\r for caVital ~oods importation, it will be seen that . a . i~p.ortant. The implementatfon of worthwhile reforms shol.1ld doub):ing o~ impOrted capital goods investments ~an be .expectbe carried o~t, .the withholding of' Amelican aid regardless. e~. In terms of aggregate domestic investment-however, the The willingness to correct ftindamental maladjuSbnents must si7e of the propo~ed aid is much less significant. In the ·postnot be bartered for dollars and an artificial balancing of war period, this has been ·estimated rOJ!ghly by the Bell Misdollar a.id against reform Seems irrelevant. Where, hpwever, si"oner~ at one billion pesos per year. It will be seen .that the 1 certain recommendations would 8.ppear to either involve the ~ontemplated aid ~ill represent a 10 percent increase i:r;:t agtransfe.r of sovereign rights or the grant of commercial privi- gregate investment. It must be remembered of course, that as }-·leges hitherto found unacceptable, then if we must be 'realis- has been pOinted out in the Report, much of tlJ.e postwar invest~tic, an appraisal of th4 aid initially recommended must be ~ents found its way into real estate, ·,increased inventories · made and placed· in the proper perspective. . an~ otller forms of trading capital, with only a min_imum The proposed aid in loan~ and grants 'is $250.000,000 over p_ortion having been chann~led into productive activity. a five-year period, or in the neighborhood of $50,000,000 per . It is "ell to keep• these magnitudes in mind to have e .year. This represents approxim8tely a percent of the total realistic .attitude- lJn wl;i~t the aid per so can or cannot accom,na!ional dollar income in 1949 of $621.000,000. It must be plish. . . 'remembered however~ that of this dollar income, approximate- It is evident immediately that permanent ·.solutions to ly $320,000,000 represents U.S.· GoVl>mmental transfers and some of the more fundamental age-old problems cited by the expenditures which.would magnify the $50,000,000 yearly aid Report ,namely, a more equit.able distribution of land, higher ~~~ a larger percentage if only ·earned ·dollar inconie were productivity for agricultural workers, lack of ~killed techni. - . . . . ' cians, etc., will f!Dt be solved ovemi_ght, neither With $50,000,admirable character: t!'•t ~ could !ight even if ·he knew 000 aid per year, nor with $150,000,000. The recommenda· all t:J;i~ odds were agamst ·him. I did not realiU: thell: th~ tio11s for the gradual solutlon ~f those problems were ne~ ~'handicaps he had to s~unt. _After the ocCupat1on, I ':as Cesserily of a long range nature .. A mc;>re direct_ approach fto taste from the same bitter cup that he had drank dunng was mS:de however, to the problems that were more· or less _/'ijte pre-war years. I like to remember ~enc~slao Q. V~n- of a pOst~e.r nature, namely, the balance of paymellts p"rozons as the _young man wh9 always kept faith with the youth. blems, the embarrassing financial position of the national gov. He.was _one who would easily and enthusiastically pick up ermnent', and th~. deterioration of peace clnd order; The a. fig~~ whenever h? knew that there was something worth attack on the first two problems especially was direct .It fighting for. He did not care what the rest of the world was believed that much of the pressure on the balance of thbUght. about his ideas. And_ a great many did idolize him. payments was due to the maintenance of money inco~s He. probably. thought that the only causes worth fighting for thrOugh goVernmental deficit spending, so in no uncertain are lost causes. As an. opposition~st, I know how it feels to terms, the correctii;m of the ·budget became the Mission's fight .. We!lceslao Q. Yinzons was the idol of the youth: sine qua riOn for.recovery. It is abundantly clear, however, he was courag~ous, because he was young; he' was~ uncom- that the Missiuh did not believe that the level of public spendproming because he w~s young; he was ambitious· because ing was excessively high, for .on the contrary, it recommends he w8s y01U1g. He died young, because he was to remajn various. increase to governmental spending indicated by its ~_-.Iways the model for the voung. ·But he would have al.ways advocacy of increased agijcultural services and health measni;nained young; because be W(!-S ~f the Stuff that patriots.' and ures, as well as an increase. in the salaries of those" in gov; .heroes are made of. It is a tragedy that·.we do not have a ernment employ. ·The balancing of the budget was .to be · Vinzons now - in the face of the current situation. Some- achieved by an increase in revenue. and to this . end, the times I wonder if. Vinzon• had not ilied in vain. ' lengthiest of the teclmical memoranda accompanying the re, P~ge 10 THE MANILA GUAfil!IAN November, 1950;' port was directed. TaxAtion then, appears to be the comer- two proposals. a~ unacceptable, is a heavy domestic excise stone of reform. tax of 25 percent which would have approximately the same ef- -"' The very comprehen'sive tax program is designed for three fed, th8.t is, to increase t~e Peso landed cost of imports for ' purposes: (1) to raise a<lditional revenues to balance the bud- the purpose of raising additional revenue for the government.· get as soon as possible; (2) to shift the incidence ·of taxation As a method for collectlng .revenue ~ely and simply, the. from those less able to those in a· better position to pay; tax on sales of exchang~ is, without q'uestion the most desirable .. and (3) to serve as a tool for directing investments. away Assuming a level of imports at P600~000,000 this coming year,. frotii the Jleretofore popular trade and real estate chanm"ls with one-half of the imports falling under the exempt list; to ·pursuits of -a more productive nature. At the. same time., this, tax alone will still yield revenues amounting to P75,0.P0,8 definite effort is made to widen the 1ax base which statis- 000 yearly.· ' tics had proved to be ·cµstres_singly smalJ.in relation jo na- Who shall bear this tax~ Just as in many other form~ tional income and populatiOn. Ori top of the long-range tax of taxation, it is not at this time possible to pinpoint pre .. program, an immediate stop~~ap measure iS. recommen~ed. .eisely who shall bear the burden. Undoubtedly, the Mission Realizing that revenue from ·proposed taxes will not be avail- took into account the poss:rbility that such a tax might ~'"· able immediately, a 25 percent tax on exchange is recommend- borne by the ultimate consumer which would," of course, low-\ eel, intended to raise approximately ('.60,000,000. This, together er standards of living that are already low, and· directly con'. with the immediately realizable r«!venue .from direct . taxes flict with their expressed desire to shift the incidence of taxa~visioned ·m the tax program, is estimated to run lnto the . tion from the great mass "of low income recipients, to a small tt5o,ooo,ooo necessary to balance the proposed budget. . ·minority of high-income, high-savings people at the top. The. · Many difficulties may be encountered wilh'"\oe,i;pect to pressing financial needs of the government ha<! to be weighed the 25 percent tax on the sales of exchange for imports·. again~t any further tax inequities and it appears reason~ble It appears quite possible that such .a tax may be interpreted that their recommendation of this stop-gap measure was foundas a 25 percent tariff on imports and µ- so interpreted, will be ed on twO premises. The first of ~ese is that hi vi~w of the in contravention of the Bell Trade Act of 1946 which pro- already inflated margins available between landed costs and , vides for free trade between the two nations . Aware of this ultimate retail prices to cOnsumers of many imported article~, difficulty, the Mission suggested one alternative, that of im: and in view of increasi:pg' cOnsumer resistance to high priced posing _..a 25 percent tax on all sales of exchange. This of imported articles with a very apparent shift to domestic subscourse, is equivalent to a temporary one way devaluatjon and titutes in many cases, much of the ~ percent exchange tax . it is quite poss:ble that permission from the IMF will be would in fact be borne by the\ importer\ l,n other words, the na: • required. The third alternative in the event that the first (Continued on page 1~) OVERLOOKING THE MANILA BAY 'iuThe Aristocrat of the Orient", renowned for its exquisitlJ suites and rooms and appointments, superb cuisine and 'lovely dance music. Alr.condiffotsed , CONTINENT AL BAR FIESTA PAVILION Air-Conditioned Dinino Roo11t11 TINDALO ROOM DAO and OAK ROOMS ·THE WINTER GARDEN MANILA'S TOP NIGHT SPOT with TIRSO CRUZ and his ORCHESTRA every night from 7: 30 p.m. .MANILA HOTEL The Address of Prestige I STA. CECILIA SAWMILLS, INC. I I - l SAWMILIB; I NO. 1 TAGK..6.WAYAN t Q u N NO.' TAGKAWAYAN E zo ~ ii I NO. 3 CALAUAG :§: ! ii§if!i~t£ PROVINCE ~ Cable Address: . j::ECIL e Tel. 2-8!)-54 Codes: ABC, 7th Ed~tion - Bentley's Comp~ete Phrase , 2nd Floor - El Hogar Filipino Bldg. e ~anila, Philippines Hon. TOMAS B. MORATO Presidllnt ., r November, 1950 THE MANILA GUARDIAN Page 13 , 'fhe Bell Report ••• (Continued from page 10) tional government would merely share in the windfall profits that have accrued to importei-s as a result of controls. The second fundamental premise· would appear to be that the increase in prices to consumers of some items regardless, the necessity of putting government finances in order outweighs this oeher consideration. and it is hoped that ehe longer range tax. prograIQ may be the instrwnent to ultimately solve :ny tax inequities alreadyJ existing or liable to arise because of the 25 percent exchange tax .. in such a taW' is that it normally leads to the adoption of multiple rate and discrimatory exchange practices. . It is a starting wedge in the direction. Certain importers will firid themselves unable to operate profitably under such an imposition. and will seek preferred rates and various planiiers will begin to device various categories of essentiality, seeking varying rates ·for each, .and in this conflict between using either profitability or esentiality as the standard for setting differing exchange taxes, it is not difficult to see another "wilderness of -restriceions, discriminations and arbitrariness" that has been seen to result in other countries that started aIOng this path with the best possible motives. On ihe other hand, the dangers to such a tax must be . To prevent the tragedy of such an occurrence, it would ~already presented. Apart __ from its possible shift to consumers seem that from the v~ry start, the purpose, the emergency ·-in the case of certain articles, it' muse become readily ~ppa- nature, and the time limit- foi:. the imposition of this tax be rent -to anyone that the very virtue of simplidty and e8.se clearly understood. It must be clearly Stated at the outset, of collection which it involves, may lead to its adoption by that this tax is -purely an emergency reven·ue-raising device, the government as a permanent revenue-raising measure. - and that exchange authorities definitely intend to return to Through its· use, the government gets used to _ m~king profits the normal rates after a very definite period. To prevent on exchange, making. succes~ive devaluations politically de- any upward pressure on liying costs, a very careful Study of sirable and an ea~y _escape mechanism from budgetary dif- itemS io ~ exempted from the tax should· be made, the de~r­ ficulti.es. At the same time, it is not ·diffiq1lt to see that such mining policy being to exciude wherever possible, items rlia procedure may encourage governmen~l subsidy of exports rectly entering into- the basic con_sumption needs of the lawsince exports become so profitable to the national governlnent. income groups. It is only 1Ulder. such consfderations t'hat this It can lead to the opening of marginal mines, of uneconomic proposed remedy may not bring in, its wake gre8ter and more industries and to permanently higher cost structures of eco- difficult problems. - nomi.c establishments as government subsidies· weaken -the Together with the- adoption of ~e fiscal measures above constant pressure_ for low~r ca:sts in a, freely competitive situa-. mentioned aimed ae ~ishing inflationary pre~sures which -tion. Finally of. course, if prolonged indefinitely, it must in. tum are responsible f9r.-bal,ance of payments difficulties the lead to pern:ianent deu.luaticm. The third inherent danger Rep.art foans towards a Co~ervative investment policy as in- . "IN MEMORY OFPIO BRUN · RAMON DE AMUSATEQUI . SPITZER" (<Jourtesy of B. DE ERQPIAGA) Legaspi Cl~y of FAR EASTERN UNIV~RSITY * QUEZON BOULEVAR;D MANILA Page 14 THE MANILA GUARDIAN November, 1950 dispensable to the attack against inflation. It lays aside for the time being over-ambitious and too rapid development. It would gear such development directly to the rate of domestic savings and to whatever aid in the form of loans and grants the country can obtain from abroad. The rate of investment of course is to be increased as savings is stimulated and many concrete recommendations. for the stimulation of savings are made. Specifically,· the nature and types of governmental securities_ suitable for investment at different levels are recommended and explicit encouragement towards the formfl.tion' of lending 'institutions that may absorb 'otherwise idle savings- fo rural communities and channel such into productive: )("l<'nc; is given .. It must be remembered, howeveF, that the fisc:::il nnFrv embodied in the tax. program will undoubtedly result in diminished savings among the .. present hig~-income group, and it must' be assumed that all equivalent amount of saving in"the great masses whose present income is so low as to permit them no savings at. all, must be achieved if gross aggregate savings are not to decline. This assumption is speculative at most, as there is no q~antitative evidence of the actual percentage of savings in various income groups~ Insofar as the direction of investment is concerned, the Report also uses fiscal measures to deter 'the continued absorption of capital into real esta~e and trading activity by imposing heavier taxes on such forms of capital. _ . It is obvious that the Mission believes that the coirtrgl of inflation is paramount at this time and that hicreases in national productivity will be best ·achieved under a sihlation where price levels and the value of the currency domestically, as well as internationally, are stable. In this regard, it "may be well to note that 0the t~eoretically sound concept that credit creation for develhpment purposes is not funda. mentally inflationary but only teniporarily so, is felt by the Mission to be uspe~ious reasoning" where "no regard is made for the conditions already existing, since even the temporary pressure it exerts at a time of great stress may result in harm of a permanent nature. Wreaths or Coronets, Which? • (Continued from page 12) V· We flew to the sun, brl'ght red in the dawnlight. We dropped blossoms ·f(,f roses, violets and marigold and black flowers beneath us. We flew to the sun spilling the fresh roses of our blood upon the fields of cloud. We crashed into the sun, the winds howling through the battered ~uselage of our bodies. VI This is the dream's ending: wreaths, not coronets, laid on the newly turned scorched earth. (We who went marching stayed up in the night, too tired to sleep, too tired to sleep.) 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