Cielo Magno Warns Against Populist Pitfalls, Urges Smarter Fiscal Stewardship

Despite the turbulent weather, Dr. Cielo D. Magno PhD — also known as Prof. Cielo — economist, former Finance Undersecretary, current University of the Philippines professor, and rising social media voice, made a striking appearance at the Monday Circle Forum, a private gathering of business and financial thought leaders held regularly at The Westin Manila in Ortigas.

In an era of populist policies and blurred economic priorities, it’s rare to hear a voice as grounded and analytically sharp as economist Cielo Magno. (Illustrator: Riz)

Over coffee and candid conversation, Magno pulled no punches in her critique of the country’s fiscal trajectory — calling out what she sees as misplaced incentives, opaque governance, and the steady erosion of long-term economic resilience.

At the heart of her address was the controversial uniform 20% final tax rate on time deposits, part of a broader package originally designed to stimulate capital markets and rationalize transaction costs.

But for Magno, who once led fiscal policy and monitoring at the Department of Finance (DOF), the policy does the opposite of what it claims to achieve.

“This tax discourages savings, particularly among middle-class families and OFWs who depend on time deposits,” she noted. “The government is essentially punishing the very behavior it should be encouraging — long-term, stable, formal saving.”

Magno underscored that the Philippines already suffers from one of the lowest domestic savings rates in the region — 27–29% compared to 35% in neighbors like Indonesia and Malaysia.

Raising taxes on interest income, she argued, could drive savers to underground financial products, crypto schemes, or informal lending systems that fall outside the regulatory perimeter.

The end result? Less financial inclusion, not more.

For context, the Department of Finance initially proposed the policy shift to offset revenue losses from the removal of transaction taxes in both the stock and bond markets brought about by the Capital Markets Efficiency Promotion Act or CMEPA — a measure which came into effect earlier this month.

However, Magno, who had been involved in early discussions under the previous administration, recalled that the original direction was to lower the tax, not increase it.

“But what is the cost of discouraging long-term deposits? That kind of economic leakage is harder to measure but potentially much more damaging,” she warned.

(Source: Cielo Magno YouTube)

Her critique doesn’t stop at tax design.

Magno’s insights into extractive industries — her academic specialty — revealed deeper structural flaws. She pointed to Semirara Mining and Power Corp., the country’s largest coal producer, as an example of regulatory capture and under-taxation.

Despite provisions in the TRAIN law requiring excise tax payments, Magno said only domestic coal is being taxed while export volumes — now comprising around 60% of output — remain largely untaxed due to outdated interpretations of Presidential Decree No. 972 or The Coal Development Act of 1976.

“If we enforced the law fully, the government could collect…billions from just one company,” she said. “Instead, we're squeezing the middle class because they’re easier to tax and less organized.”

Semirara Mining and Power Corporation (SMPC) is the Philippines’ leading coal producer and the only integrated power company with its own fuel source. (Photo: SMPC)

This pattern of revenue erosion runs throughout Magno’s assessment.

She criticized how CREATE MORE (the amended version of the 2021 CREATE Law) reversed hard-fought reforms by returning the discretion to grant incentives back to economic zones — introducing more political interference and less oversight.

“When we give away billions in tax incentives, we need to treat them as foregone spending,” she stressed.

Magno also highlighted how some legislative proposals have veered dangerously off-course. The push by certain lawmakers to reduce tobacco excise tax increases from 5% to as low as 2% — despite rising smoking incidence — was singled out as a classic case of populism over prudence.

In her view, the country is caught in a troubling cycle: growing deficits, rising congressional budgets, and reactive policymaking devoid of industrial vision.

“Spending has increased dramatically, but there’s no clear investment direction,” she said. “We need to prioritize sectors like electronics, AI-readiness for BPOs, or downstream mineral processing — just like what Indonesia successfully did with nickel.”

Magno’s voice carries weight not just because of her academic credentials or her previous government post, but because she understands how technical decisions translate to everyday consequences.

She sees how populist economic gestures — like ₱20 rice or removing petroleum excise taxes — may sound appealing, but often carry long-term fiscal costs that far outweigh their short-term popularity.

Despite the sobering tone of her analysis, Magno remains optimistic — if guarded. She advocates for stronger civil society engagement, institutional reform of revenue agencies, and a shift away from politically expedient tax-and-spend cycles.

“We need to stop solving problems with policies that create even bigger ones,” she said.

Known for her fearless commentary on social media — sometimes to the ire of political actors — Magno represents a new breed of public intellectuals in the Philippines.

She’s just as comfortable posting explainer videos on TikTok as she is debating mining royalties with cabinet secretaries.

“We can’t afford to be silent,” said economist Cielo Magno, urging bold reforms in fiscal policy and stronger citizen engagement at the Monday Circle Forum. (Photo: PJ Lanot)

Her Monday Circle Forum appearance was a reminder that facts still matter — and that the country’s economic future may depend on how loudly and clearly those facts are heard.

As Magno succinctly put it, “We can’t afford to be silent. If we let misguided policies dominate without challenge, we’ll be paying the price for generations.”