5% tariff hike to raise P245 billion, but risks studied

File photo: Some of the thousands of repatriated overseas Filipino workers (OFWs) under Covid-19 quarantine, many for periods far beyond the mandatory 14 days, are seen at Naia Terminal 2 on Monday before the final leg of their homecoming, on government-funded sweeper flights.

THE government is assessing the need to implement a 5-percent increase in tariffs on all products to raise P245 billion immediately for the efforts to fight Covid-19.

Trade Undersecretary Ceferino S. Rodolfo told reporters that the government is studying the option of imposing an additional 5-percent duty on all imports to generate funds for crisis response. He explained that an across-the-board tariff increase is the reasonable way to go than targeting certain products, which could entail allegations of protectionism from trading partners.

Estimates from Rodolfo’s office showed that the government will earn P245 billion if it chooses to place a 5-percent tariff on all products based on 2016 to 2018 rates.

“At this point, we need resources to fight Covid-19, [and] I know there are a lot of concerns about that 5-percent proposal,” Rodolfo said. “But we told the DOF [Department of Finance] to just inform us if we need to impose the additional tariff.”

He added, “DOF officials asked to give them one month to implement it if necessary.”

State officials are assessing how such move would impact international agreements, and how the additional tariff on specific products, particularly essentials, would impact on inflation. However, Rodolfo said there should be little concern on the treaties with trading partners, as the proposed action would affect all imports and not just specific goods.

Further, he argued that many economies are implementing protectionist measures as well to protect their own industries and peoples. He cited Vietnam, which enforced a temporary export ban on rice to ensure its food security during the crisis.

“We are just giving the measure due diligence because we were told it’s not yet needed for now. We are still assessing it seriously just in case we have to pull the trigger,” the trade official said.

Risk of pass-on costs

Rodolfo: “We are just giving the measure due diligence because we were told it’s not yet needed for now. We are still assessing it seriously just in case we have to pull the trigger.”

The plan, however, does not sit well with experts and business leaders, as they fear that the cost of additional tariff would only be passed on by importers to consumers.

Maria Ella C. Oplas, economics professor at the De La Salle University, told the BusinessMirror that many industries rely on inputs from abroad for their production. As such, she said it is ill-timed to add a burden to them, especially that they are just starting to resume operations.

If at all, Oplas said the government could give out tax cuts for everyone in order to cushion some of the economic impact of the coronavirus pandemic.

“The government should even give tax holidays for all just to alleviate the circumstances that we are in right now, so that we have more buying capacity and freedom to choose what we buy. No to new taxes, relax collection and no to raising tariff,” Oplas said.

On the other hand, Philippine Exporters Confederation Inc. President Sergio R. Ortiz-Luis Jr. described as disastrous the prospect of having all products hit by the tariff hike.

Ortiz-Luis said the government should target only certain products and ensure that essential goods, such as food, are spared from any cost increase. Further, tariff rates for medical products needed in the fight against the virus should be maintained as well, if not lowered, he added.

“It should be a no-brainer that food and medical products must be spared from any tariff hike given that we are in dire need of them right now,” the industry leader said.

Image credits: Nonie Reyes


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