ECONOMIC managers are missing the point on inflation, consumer groups have argued, as they proposed yet again the suspension of the Tax Reform for Acceleration and Inclusion (TRAIN) law to stabilize prices of goods and services.
In interviews with the BusinessMirror, consumer groups said reducing tariffs on certain food products can only do so much in weathering prices. They urged the administration’s economic team to review policies and control what it can control, such as the excise taxes imposed by the TRAIN.
“It is the TRAIN. Slashing import duties could mean worsening the situation, especially for the poor and small producers who cannot compete given the entry of imported products,” said Louie C. Montemar, coconvenor of Bantay Konsyumer, Kuryente at Kalsada.
“Taxation is the cause and now nontaxation of foreign products is the solution? We have a warped governance approach,” he added.
Montemar was referring to the government’s plan to lower to 5-percent import duties on fish, corn, meat, particularly chicken, and wheat. Economic managers made the pitch to President Duterte last week as part of efforts to moderate inflation, or the general increase in commodity prices, which has been ticking upward month after month since January.
July inflation was at 5.7 percent, the highest in five years, putting year-to-date inflation at 4.5 percent, well above the Central Bank’s target ambit of 2 percent to 4 percent.
Laban Konsyumer Inc. President Victorio A. Dimagiba specified excise tax on oil as one of the TRAIN law’s provisions that must be reviewed. He said the logistical cost of transporting food from farms to markets have certainly gone up, even if global petrol prices are stable, because the TRAIN imposed duty on oil.
“In a supply chain that is lengthy, all of them [from producers to traders to distributors to retailers] have transportation costs. All of those take impact from the excise tax, [and] that is the direct impact of the TRAIN,” Dimagiba explained in a mix of English and Filipino.
Under the fiscal law, oil was slapped with an excise tax of P6 over the next three years: P1 this year, P2 next year and P3 in 2020. Lower rates, on the other hand, were applied on essential petroleum products, including diesel, kerosene and LPG.
Further, Dimagiba argued the TRAIN implanted in businesses the perception that they must increase prices to cope with rising production cost. “The indirect impact of the TRAIN, which the government prefers to evade, is when you reform your tax policy and impose additional duties, there will really be a perception to businesses that they should increase their prices,” he said.
“Their expectation is that prices should go up, [and] that is what we call profiteering,” Dimagiba added.
Montemar and Dimagiba also pressed the government to become more proactive in engaging the private sector. Montemar said suspending the TRAIN law might not necessarily result in a decrease in prices, unless businesses are put to task by authorities.
“Even if the government suspends the TRAIN—and I wish it would—prices may not readily respond. We need a political solution. The government needs to mobilize its agencies to ensure quick action on stimulating local production and controlling prices. The private sector needs to be made more cooperative,” the consumer group leader said.
For his part, Dimagiba appealed to authorities to do their part in going after profiteers, hoarders and cartels. He, however, maintained the review of the TRAIN law and its suspension must be considered by the government as top option to control price surges.
“Whatever their reason is—[lack of] raw materials, [weak] foreign exchange, among others—what the government cannot deny is that prices are higher now. That is what the TRAIN has given us,” the former trade official and now consumer rights activist said.
Laban Konsyumer has advised the Department of Trade and Industry to implement mitigating measures in response to the 5.7-percent inflation recorded in July.
Among these measures was the implementation of a moratorium on any price hikes on items with suggested retail prices (SRP) until first quarter of next year. The group said the country is about to enter the holiday season, a period when another round of price increases is to be expected out of pressure on demand and supply.
Easy-open but costly
On top of this, the group urged trade officials to discourage manufacturers from making use of easy-open lid for canned goods. Removal of this feature will apparently translate to savings of a minimum of P0.50 per can.
Business leaders, on the other hand, dismissed the sentiment of consumer groups. They told the BusinessMirror they prefer tariffs on several products to be brought down—even if it will be to the detriment of local livestock raisers and fishermen—than to suspend the TRAIN law.
“Concerned sectors have to pay the price for solutions like this. It is always the long and the short of it, [there are] pros and cons, [and] legislators see this move as timely to earn a few votes of confidence given consumers’ woes,” said Steven T. Cua, president of the Philippine Amalgamated Supermarkets Association Inc.
He also said consumers have to understand fiscal reforms, such as the TRAIN, are needed to fund the government’s infrastructure projects and social programs.
“Excise tax [on] oil has its merits in hopefully minimizing unnecessary trips leading to a more livable traffic situation, aside from all the economic gains it provides the government. Concerns of consumers regarding increasing prices of course [are] valid, but tax decisions are part of the price to pay for progress assuming that the government gets to accomplish what it sets out to do,” Cua added.
The TRAIN is estimated to beef up the national treasury by P121.2 billion, or 0.7 percent of the country’s GDP. At least 70 percent of the tax law’s revenue stream is allocated for public infrastructure listed under the “Build, Build, Build” program, while the other 30 percent is penciled for social services.
George T. Barcelon, chairman of the Philippine Chamber of Commerce and Industry, agreed with Cua, and argued it is futile to suspend the TRAIN law’s provision on petrol tax. For him, the excise tax has little to no effect on fuel prices, as higher duties are only scheduled to be applied over the next two years.
“The excise tax on oil has minor impact [on inflation] because that is a three-year adjustment. The first year has little impact, [so] I do not know whether that [suspending the provision] would amount to anything,” Barcelon said in a mix of English and Filipino.