Consumers, labor: Price spikes to follow tax hike
In Photo: Meat vendors arrange their goods at a market in Quezon City in this file photo.
By Elijah Felice E. Rosales & Samuel P. Medenilla – December 4, 2018
Source: Business Mirror
CONSUMER groups on Monday warned prices of basic goods will remain high if the government proceeds with its plan to implement the next round of the tax hike on fuel in 2019.
Labor groups on Monday weighed in on the issue as well, and called on President Duterte to junk the recommendation of his economic managers to push through with the next-round fuel excise tax hike next year.
The President is expected to take up the matter at Tuesday’s (December 4) Cabinet meeting, where economic managers will present the basis for the Development Budget Coordination Committee (DBCC) reversal of its earlier support for suspending the tax hike.
Consumer groups interviewed by the BusinessMirror said the government will fail to temper inflation if it recalls its decision to suspend excise tax on petroleum products. The economic team last week announced it will recommend to President Duterte the continued implementation of the scheduled next round of excise on fuel.
This is in the face of a more favorable outlook in global crude prices, the DBCC said. It explained Dubai oil prices fell 14 percent to $68 per barrel last month from $79 per barrel in October.
Louie C. Montemar, convenor of Bantay Konsyumer, Kuryente at Kalsada, said there is no reason for the government to lift the excise suspension. Citing Finance Undersecretary Karl Kendrick T. Chua, he argued the government can make do with the estimated P41 billion in revenue losses that will result from the suspended increase of fuel tax.
For his part, Laban Konsyumer Inc. President Victorio Mario A. Dimagiba called it a “bad decision” for economic managers to move for the implementation of the next round of excise on oil.
“Inflation will remain elevated. We have six to seven layers of the supply chain that use fuel and power,” Dimagiba argued.
Inflation, or the general increase in commodity prices, rose 6.7 percent in October. Average inflation stands at 5.1 percent, well beyond the government’s target range of 2 percent to 4 percent.
In arguing against the economic managers’ consensus to ask President Duterte to backtrack on his earlier commitment to suspend the next-round fuel excise tax hikes under the TRAIN law, Montemar recalled that DOF’s Chua had been consulted about the issue last month, when the DBCC was still debating whether to heed the clamor for suspension. At least 17 senators from the majority had also written to Duterte on November 7 to push for the suspension.
“Just some weeks ago, a DOF Undersecretary said that the government is projected to lose about P41 billion from the expected suspension of the second installment of the tax increase on petroleum products under TRAIN [Tax Reform for Acceleration and Inclusion],”
Montemar said.
“However, he [Undersecretary Chua] pointed out that the actual loss will not be that big and that DOF [Department of Finance] already has plans on how to manage things if the excise taxes are suspended,” Montemar added.
With the tax increase stalled for the whole of next year, the government is expecting P41.6 billion in revenue losses. However, in an earlier Senate hearing, Chua said this could be offset by P14 billion in value-added tax (VAT) collections.
“Yes, the prices of oil products have gone down, but will they stay there? DOF knows we can make do with the suspension, [so] let’s have them for our consumers,” Montemar said.
He also claimed that prices of basic goods did not reflect the lowering of oil prices. He said it is easier for manufacturers and retailers to raise prices, but harder to reduce them.
“In other words, it is so easy to jack-up prices, but far more
difficult to pull them down. If we push through with the [second-round] TRAIN excise tax on oil, we will continue with the pattern of inflation that we have been having,” Montemar argued.
The consumer group leader said the government must give “consumers a break” and that the DOF should find a sweet spot for all to end a year mired with left and right price hikes.
Labor groups, too
Partido Manggagawa (PM) Chairman Renato Magtubo said the suspension of the 2019 round of the fuel tax hike is necessary to give low-income workers “breathing space” from the impact of TRAIN.
“Pushing for its implementation depicts this government’s low regard for the welfare of the poor people affected by their tax policy that burdens them more,” Magtubo said.
Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) Spokesman Alan Tanjusay said: “Without current proof of felt economic benefits and the existing utter lack of social safety nets to paying workers and their families, the decision to push through with the additional tax signals that we are [in for] dangerous times.”
Tanjusay said they still hope Duterte will reconsider the proposal of his economic managers on the matter.
Duterte still undecided
After the conferment ceremony of the prestigious Quezon Service Cross Awards on the late Sen. Miriam Defensor Santiago on Monday, Duterte said he is still undecided on the matter.
He said he will still discuss it at the Cabinet meeting on Tuesday before deciding whether to implement it or not.
“It is a collegial body so you have to arrive at a consensus. How it would impact on each and every aspect of the life of the community…that could be articulated
by the Cabinet member who handles a particular department,” Duterte said.
He said he will also review the possible effects of the nonimplementation of the tax hike on government budget and projects.
Ready to defend
If Duterte approves the P2-per-liter fuel tax under the TRAIN law, Malacañang said its economic managers are ready to defend it before the Senate.
In a press briefing, Chief Presidential Legal Counsel and Presidential Spokesman Salvador S. Panelo said he is confident the DBCC agency heads can persuade the senators to support the tax hike.
“I am sure the economic managers have basis in making that recommendation. They are competent and able to explain themselves,” Panelo said.
Panelo issued the pronouncement in response to the statement of Sen. Sherwin T. Gatchalian that he may push for the delay in the passage of 2019 national budget if the scheduled next-round hike takes effect.
Last week the DBCC retracted its proposal to suspend the hike in 2019 as fuel prices in the international market are expected to remain low next year.
Gatchalian opposed the fuel tax hike since it may worsen inflation.
Aside from Gatchalian, other senators concerned over the effects of the tax hike include Sens. Juan “Sonny” Angara, Aquilino “Koko” Pimentel and Paolo “Bam” Aquino.
Furthermore, Panelo said any delay in the completion of the 2019 budget will reflect not on the performance of Duterte, but on Congress. The P3.7-trillion 2019 national budget is currently pending in the Senate.