Wednesday, June 25, 2014

The inflated truth about our laws

CLARITY and uniform interpretation over both time and space are thought to be appealing characteristics of laws. Nothing is as straightforward as the classic “eye for an eye and tooth for a tooth,” or the command to “flog the man and woman guilty of fornication each with a hundred stripes.” Or even (when it existed) the death penalty for the crime of rape or for drug dealing. As long as society continues to hold to these correspondences between crimes and their respective penalties, “justice” as society conceives it is implemented uniformly, regardless of time and place.

But certainty and timelessness are easy to come by only in existential extremes such as the above (what economists might call “corner solutions,” such as death). Things become more complex when gradations and distinctions are necessary. This is nowhere more evident than when monetary values are incorporated in the law.

Precision frequently demands that framers of the law prescribe definite monetary amounts. Examples of this abound. Prison terms for estafa and qualified theft will vary depending on the peso amounts stolen. Individual and corporate income taxes under the tax code are defined by a schedule that depends on a person’s or corporation’s peso earnings. The tax on cigarettes depends on whether the brand costs more or less than P11.50 per pack. (At the University of the Philippines, our own subsidised tuition and and assistance scheme requires different fees from students according to levels of their family’s peso incomes.)

The problem, of course, is that those same money amounts used to define categories, penalties and obligations -- clear and unambiguous enough when the laws and rules were crafted -- no longer have the same meaning as time passes. Inflation is the prime culprit. Changes in the general price level alter the value of of the money unit and render the money metric like a rubber ruler, whose length can be stretched and distorted through time. Because of this, one is no longer certain that justice is faithfully and uniformly served across time.

This is highlighted by a case recently decided by the Supreme Court (Lito Corpuz v. People of the Philippines; GR 180016). A person was found guilty of having committed estafa in 1991 involving P98,000. The Revised Penal Code (passed in 1930 and unchanged to this day) imposes varying amounts of jail time for estafa depending on the monetary amounts involved. The maximum amount is “P22,001 and above,” which corresponds to a jail penalty of “eight years and one day, plus one year for every additional P10,000” but not to exceed 20 years. This correspondence between the monetary offense and penalty embodied society’s sense of justice and proportion at the time. Applying the letter of the existing law to the present case, the convicted would have to serve a total of 15 years.

But P98,000 in 1991 prices is certainly not the same as P98,000 in 1930 prices. With high inflation over the years, the equivalent amount in 1930 prices is obviously far less, and therefore so should be the corresponding penalty.

In a lucid dissenting opinion (shared by Justice Marvic Leonen), Justice Roberto Abad makes an educated estimate that prices may have increased a hundredfold between the two periods. If so, then the same offense would merit a far lower penalty: “The P98,000 jewelry items subject of the offense would have a value of only P980 in 1932. Consequently, had [the convicted person] committed the crime in that year, he would have been imprisoned for only two years and four months maximum. But since he committed it 59 years later in 1991 when the jewelry items are now valued at P98,000 due to inflation, he would be imprisoned for 15 years maximum -- the same crime, the same law, yet a shockingly higher penalty. This result would undoubtedly deny Corpuz his constitutional right to equal protection of the law.”

In the end, the rest of the Supreme Court did not support Abad’s and Leonen’s opinions. While half-conceding the validity of the substantive points raised, the other justices refrained from acting on them, on the ground that doing so would amount to revising the law, which is the job of Congress. In the meantime, some obvious injustice is being committed every day not only in this case but in all other instances where superannuated schedules based on nominal money values are applied -- most important are unwarrantedly long deprivations of liberty handed by the courts, no less.

If the Supreme Court persists in its view that it will not interpret real versus nominal values, then clearly the ball is in the legislature’s court. House Speaker Feliciano Belmonte Jr., in a memorandum to the court, essentially stood upon Congress’ prerogative to prescribe punishment (“the recodification of the Revised Penal Code is already being done by Congress”), but more significantly he also denied the need to amend the schedule of penalties, or the need to maintain consistency or “proportionality” in penalties through time. Indeed, he says, the greater punitiveness arising from the change in the peso values has unintentionally but fortuitously made the penalty scheme “more reasonable” and “protective of the poor.” (The Speaker neglects to explain how a penal code that punishes estafa worth P100 with a jail term of four to six months can be pro-poor.) In other words, the Supreme Court has tossed the problem to Congress, and therefore we can expect Congress to do... nothing.

This is unfortunate -- as well as inconsistent. After all, Congress has not shied away from indexing the sin taxes to inflation, increasing the nominal amounts of tax by 4% annually to protect the real value of government revenues. In the opposite manner, however, it has also tarried in adjusting income brackets in the tax code, effectively allowing inflation to push people up the tax brackets and pay higher average and marginal tax rates -- again resulting in higher revenues for government. Index some things but not others. Where is consistency?

All of this can only lead to the suspicion that the government is assiduous only when it comes to protecting the real value of its claims against its citizens -- especially when these claims are in pecuniary form. But it is niggardly and slow in dispensing that most basic and minimal non-monetary claim citizens expect from it -- justice and fair treatment.

(The author is an Oscar M. Lopez professor at the UP School of Economics and an IDEA Fellow.)


source: Businessworld

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