DTI: Coal tax to affect resurgence of local manufacturing sector

The Department of Trade and Industry (DTI) urged policy-makers to reconsider the proposed hike in excise tax on coal, as its impact on electricity cost may temper the manufacturing sector’s growth.

“Offhand, I’m saying that proposal may merit further study. It’s a bit surprising and it’ll be a challenge in terms of the cost for the power producers,” Trade Secretary Ramon M. Lopez said in an interview on Tuesday at the annual Export Congress that the DTI jointly organized with the Philippine Exporters Confederations Inc.

He conceded that the expected growth of the manufacturing sector —estimated to reach 10 percent next year—may be dragged down by the proposed tax on coal, which was introduced in the Senate version of the Duterte administration tax-reform bill.

“As long as we have that competitive production capacity, [we can reach the target],” he added.

Last week the Senate made the move to increase the excise tax on coal to as much as P300 per metric ton in 2020, from the current P10 per MT.  The increase will be done in stages: P100 in 2018, P200 in 2019 and to P300 in 2020.  Senate Comittee on Energy Chairman Sherwin T. Gatchalian, who was present in the Export Congress, said end-users will bear the brunt of the increase. He estimated the hike in the electricity bill—after the three stages—at P28.70 per kilowatt-hour. The coal tax is meant to raise government revenues for the massive infrastructure program of the Duterte administration.

The country’s largest business organization, the Philippine Chamber of Commerce and Industry (PCCI), composed of mostly micro, small and medium companies, already expressed its opposition to the proposed coal-tax increase early this week.

“We need to drive our economic inertia to the level of over 7 percent per annum in order to make real significant comparative gain over our neighbors in the region and achieve inclusiveness,” PCCI President George T. Barcelon said in a statement.

“Power quality and costs are indeed among those critical elements that are always viewed by foreign and local investors, especially with regard to heavy industries.”

Just last week at the Manufacturing Summit 2017, the DTI cited the continued growth of manufacturing this year. It expanded 8.3 percent in the first three quarters of the year, with the sector growing by 9.4 percent in the third quarter alone.  This is a turnaround in the past, when the services sector has been the main driver of growth.

The DTI spearheaded the Manufacturing Resurgence Program aimed at reviving  the manufacturing sector and integrating select industries.