Surely, the government’s tax planners and the members of Congress knew that their Tax Reform for Acceleration and Inclusion (TRAIN) law would increase the prices of many consumer goods.
When prices started to rise at the beginning of the year, one official said it could not be due to the TRAIN law as as the new tax rates apply only to new stocks, not the ones already on the market. Very likely, it was said, the price increases were due to profiteering, along with higher oil prices in the world market and the peso’s weakness.
But it was precisely because of TRAIN that many business enterprises have begun to raise their prices, in anticipation of the inevitable tax on their new goods. Some oil companies did this right at the start of the year and small stores may be expected to do the same.
The price increases may have been premature in some cases, but they are inevitable because of TRAIN, particularly its provision for increased excise taxes on petroleum products, particularly diesel which fuels cargo trucks transporting goods to markets.
The increased tax on coal – while welcomed by advocates for a better environment – is also bound to push up power rates because coal plants are still the principal producer of electricity in this country. The Philippines is known for its high power rates, one reason foreign investors would rather go elsewhere. The new power rates increase will further hold back our efforts to encourage manufacturing in this country.
TRAIN also increased the tax on sweetened beverages. Whlle this is welcomed by health officials concerned with increasing obesity among Filipinos, it has set back the operations of small storeowners who sell a lot of bottled drinks.
The TRAIN’s lower tax rates for employees – 25 percent for those with salaries of P21,000 a month or P250,000 a year, down from the previous tax rate of 32 percent – will benefit this class of people. They will have much more to spend and this in turn will boost the economy. But there are many more unemployed people in this country; they will not benefit from new tax rates.
And so the price increases have begun because of TRAIN. It has begun to increase the tax collections which the government needs to fund Build, Build, Build, and other programs for the country. But this early, the government should assess the expected impact of TRAIN on the vulnerable sectors of the population through increased prices.
What ordinary folk call high prices is termed inflation by economists. In 2016, the Banko Sentral ng Pilipinas (BSP) set a target of 2 to 4 percent inflation for 2016 to 2018. When President Duterte assumed office in 2016, the inflation rate was at 2 percent, the low end of the BSP target This January, it reached the high end of 4 percent – its highest level in the last three years.
There may be other causes, such as rising world oil prices and the peso’s weakness, but surely a big factor is the increase in fuel prices due to the TRAIN law. This early, our officials should be drawing up plans to help the poorest of the poor in our country weather the rising prices of consumer goods.