BATU, Indonesia. Photo by Jes Aznar

Thursday, September 1, 2011

Legislative War Declared On Abusive GOCCs – Will It Succeed?

During last September’s Senate hearings, Metropolitan Waterworks and Sewerage System (MWSS) officials revealed that they received 25-month bonuses apart from their salaries. One official earned PhP 4 million (USD 95,238) in 2009 alone.

The bonuses include an anniversary bonus, mid-year financial assistance, yearend financial assistance, productivity bonus, performance bonus, educational assistance, rate-rebasing bonus, privatization bonus, efficiency incentive, performance enhancement bonus, corporate Christmas package, traditional Christmas package, calamity financial assistance, scholarship allowance, and family week allowance, among others.

This is in clear violation of a memorandum order issued by the previous administration, which limits the salaries of government-owned and -controlled corporation (GOCC) executives to twice that of Cabinet secretaries.

Because of this, President Benigno Aquino III successfully pushed the approval of the new GOCC law in June to support his war on corruption.

In an interview with the Philippine Public Transparency Reporting Project (PPTRP), Finance Secretary Cesar Purisima said the new GOCC law (Republic Act 10149 or the GOCC Governance Act) aims to give the government more powers to control them. “We will have more discipline and better management of GOCCs,” he said.

The Finance chief believes that it is better to monetize the assets of some GOCCs and rationalize their operations especially those that are not operating very well. GOCCs have served as milking cows of different administrations, according to Purisima.

For instance, he cited the case of the National Food Authority (NFA) which has been a huge thorn in government’s side. The Aquino administration has been trying to find ways on how to address the money-losing operations of such agencies.

Citing data from the Department of Finance, Purisima said the liabilities of NFA have risen to PhP 171 billion (USD 4 billion) as of end-May 2010 from only PhP 28 billion (USD 666 million) in 2003.

Because of the problem of the NFA, the government is also looking at expanding the government’s Conditional Cash Transfer (CCT) program so that it would target those who cannot afford to buy rice at prevailing market prices.

From January to June last year, total subsidies which the government provided the NFA reached to PhP 7.466 billion (USD 178 million), half of the average amount of subsidies given to state-owned firms yearly.

Now, Purisima says, the government is committed to reviewing the performance of more than 150 GOCCs and government financial institutions (GFIs) including the NFA.

Even multilateral agencies have recommended the abolition of some GOCCs to end the drain on state coffers, said Finance Undersecretary Jeremias Paul Jr. in a separate interview with PPTRP.

So far, DOF studies show that more than 150 GOCCs and GFIs were either underperforming or losing money.

The landmark GOCC law aims to give the government greater control over GOCCs and makes their operations more transparent.

Governance commission

True to the spirit of Aquino’s promise of a “daang matuwid” (straight path) or corruption-free governance, the new law also aims to put an end to the culture of patronage in government.

As such, the law puts in place a governance commission for GOCCs. The commission will have the authority to reorganize, merge, streamline, privatize or abolish state-owned agencies.

Appointees in GOCC positions would also be carefully screened to ensure that they will perform well and not waste government resources.

They will also be regularly monitored and evaluated based on their performance.

Yet as with any reform measure, the law has been questioned.

House Minority Leader and Albay Rep. Edcel Lagman has filed a petition before the Supreme Court, questioning the legality of the measure. He said that while “scandalously huge salaries, allowances and perks of some GOCCs should not be tolerated and must be rectified, it cannot be righted by another wrong.”

In a petition filed before the Supreme Court, Lagman said the law violates the security of tenure of civil servants and that it gives “undue delegation and utter abdication of legislative powers, and supplants the jurisdiction of the Civil Service Commission through the creation of the Governance Commission.”

To put it simply, Lagman believes the law interferes with the mandate of the Civil Service Commission.

Lagman also asked that respondent Executive Secretary Pacquito Ochoa Jr. be prevented from enforcing the law and that Budget Secretary Florencio Abad be restrained from releasing funds for the implementation of the law.

Lagman claims that the Aquino administration railroaded the approval of the law in order to create vacancies in certain GOCCs. He believes that the administration wants to accommodate election losers and put them in certain positions in some GOCCs.

Harmonizing issues

On the other hand, the new chief of the Social Security System (SSS) believes that the law is a welcome measure and would help in managing GOCCs.

“The new law will harmonize all of the issues and provide standards for compensation,” says SSS president and chief executive officer Emilio De Quiros, Jr. Former SSS president and chief executive officer Romulo Neri has been the subject of a tax evasion case filed by the Bureau of Internal Revenue (BIR) for not paying taxes for the bonuses and hefty perks he received while he was at the helm of the state-owned pension fund.

Neri, the BIR alleged, under-declared his income including allowances and bonuses from different corporations for taxable years 2008 and 2009. According to the BIR, Neri earned a total taxable income of PhP 11.35 million (USD 270,238) in 2008 and PhP 34.2 million (USD 814,286) in 2009 in his capacity as SSS president and nominee to the Board of Directors of Philex Mining Corporation and Union Bank of the Philippines.

Computations made by the BIR show that Neri under declared his income by PhP 9.9 million (USD 235,714) or by 88.08 percent in 2008 and PhP 18.8 million (USD 447,619) or by 54.92 percent in 2009, resulting in a tax deficiency of PhP 6.3 million (USD 150,000) in 2008 and PhP 12 million (USD 285,714) in 2009. If correct, this would bring Neri's total estimated tax liability for 2008 and 2009 to PhP 18.3 million (USD 435,714).

The amount includes surcharges and interests, the figures show.

Neri was one of SSS executives who were the subject of a Senate inquiry after it became public that they received excessive bonuses and allowances including the exercise of stock options of more than PhP 127 million (USD 3 million) as board members of Philex from 2007 to 2010.

The case is still ongoing but the Department of Justice has filed probable cause to sue Neri for tax evasion.

SSS’ De Quiros said that to avoid what has happened in the past, the new administration is careful in dealing with the perks and stock options of its board members and officials.

He said the current administration abides by what is in the SSS Charter and would strongly adhere to the new GOCC law.

Whether or not the new law would prevent officials and employees from pocketing government resources still remains to be seen.

But hopes remain high among the Filipino public that President Aquino will stay true to his promise of constructing and leading a corruption-free government.