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International Relations expert teaches Ms. Karen Davila how to ask the right questions when talking about government debt in next interview

According to International Relations expert and SMNI host Sass Rogando Sasot, when Ms. Karen Davila dropped the now infamous line to incoming Finance Secretary that the government has no money, she can’t help but wonder, where is Ms. Davila coming from? If she and Ms. Davila live in different countries? Is the government bankrupt that it does not have the money to finance government services?

Sasot speculated that Ms. Davila must have framed her questions that way due to lack of understanding of the country’s debt. Yes its huge but we don’t need to pay our debt in one go unlike Bumbay 5/6 debt that you ought to pay in a daily basis. Sasot explained that some of our debts have grace periods. Meaning, there is “palugit” or a period of time beyond a due date during which a financial obligation may be met without penalty or cancellation. Majority of our which are domestic debts – bonds, treasury bills, securities…These kinds of debts will be paid in long while and according to their maturity dates.

Sasot said that the Diokno interview would have been fantastic, not mediocre, if Ms. Davila instructed her researchers to know the maturity dates and grace periods of the country’s debts. She would have known if in the last 6 years, what country’s debts are up for payment and compare it with the countries projected revenues. Sasot hoped that Ms. Davila should have asked our country’s debt servicing capacity instead of asking apocalyptic questions.

Furthermore, Sasot agreed with incoming Finance Secretary Ben Diokno’s statement regarding TRAIN law and the consolidation of our tax structures, and that, it will address the issue on government revenue.

Sasot went on to explain the TRAIN Law and its advantages like she would to a 6th grader that is very easy to understand for someone like Ms. Davila who is a UP grad.

Basically, the TRAIN law is about the government lowering the income taxes so that people have more money in their hands to spend on goods and services. The idea is, when people have more money, they will likely spend it on goods and services. And when people spend, the government makes money by taxing their consumption. So everybody is happy.

On one hand, if the taxes are high, people tends to spend less because they have less money on their hands to spend.

You may now read Sass Rogando Sasot’s original FB post below.

When Ms. Karen Davila told the incoming Finance Secretary Benjamin Diokno Jr, “I will make it simple. Walang pera ang gobyerno!” I thought to myself, where is Miss Davila coming from? Do we live in different countries? Is our country bankrupt that we don’t have any money anymore to finance government services?

Siguro ang iniisip ni Miss Karen Davila eh ang utang natin ay malaki. However, ang utang ay hindi po ito binabayaran ng isang bagsakan. Ang 5/6 nga ng mga Bumbay araw-araw mong hinuhulugan. Some of the debts have a grace period before you pay them. Majority ng utang ng bansa ay domestic debts — through bonds, treasury bills, securities…At ito po ay may mahabang panahon bago mabayaran according to their maturity dates. Siguro mas malalim ang magiging talakayan nila kung si Miss Karen Davila ay inutusan niya ang kanyang mga researchers na alamin ang maturity dates at grace periods ng mga utang. At malalaman niya na kung in the last six years ano ba ang mga dapat bayaran ng bansa sa mga utang at i-compare ang projected revenues ng bansa. Sana ang tinanong ni Miss Karen Davila eh is about our country’s debt servicing capacity. Mas malalim na talakayan yan at hindi iyong apocalyptic questions starting it “Walang pera ang gobyerno.”

Tama si incoming finance Secretary Benjamin Diokno about the TRAIN law at consolidation ng ating tax structures para matugunan ang issue ng government revenue. Kung hindi nagka-pandemic we would have really felt the magic of the TRAIN law.

Sa mga hindi nakakaalam, exempted 250K and below earners from paying income tax at ang ibang tax payers (maliban sa richest among us) ay nagkaroon din ng reduction sa income taxes.

Siguro ay inyong tinatanong: Kung binabaan ang income tax, papaano kikita ang gobyerno? Well, ganire iyan – through consumption tax. Lahat ng bibilhin mo ay may tax. Ang idea behind removing income tax and reducing them eh para ma-stimulate kang gumastos dahil mas malaki ang iyong disposable income. So dahil dito, lalakas ang demand sa goods and services. Ngayon, dahil ikaw ay mas bibili ng mga goods and services, kikita ang gobyerno, at higit sa lahat ang iyong behavior ay magdudulot ng job generation: Rise in demand leads to job generation because providers and goods and services would need to hire more people to increase production. Nang kasagsagan ng pandemic, patay ang demand, patay din ang trabaho. So sa pag-recover natin..spend, support the economy, specially buy sa mga SMEs. But don’t forget to save.

Kapag kasi mataas ang income tax, ang behavior na i-produce nyan eh ang mga tao will spend less. The income tax you pay the government will not necessarily produce jobs dahil nga hindi naman nito pinapalaki ang demand ng goods and services. Gets nyo? Keri?

So ayun lang powz…

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Source: For the Motherland – Sass Rogando Sasot

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