Consumer taxes will hit D and E hard

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Presented as a landmark law that will ease the burden on low-income earners and simultaneously help fund the government’s massive infrastructure program, the ambitious tax reform package has nevertheless been hit by critics from seemingly all sides.

 Groups have come out of the woodwork to decry some proposed measures under the Tax Reform for Acceleration and Inclusion (TRAIN) bill, specifically those that they say are inherently anti-poor and anti-consumer. For instance, the Senate’s version attempts to soften the impact of the Department of Finance proposal of a P6 increase in the excise tax of petroleum products by spreading the increase over three years from 2018 to 2020.

Sa usapin ng produktong pampetrolyo, panukala ng Senado ay isang 1.75-2.00-2.25 na schedule ng pagtaas ng excise tax, mula 2018 hanggang 2020,” said Senator Sonny Angara. This slightly diverges from the Lower House’s version of 3-2-1. Needless to say, any movement in the prices of petroleum products predictably sends shockwaves elsewhere, from the minimum fares in public transportation to the prices of commodities.

On top of this, power rates will also be affected. For power the majority of electricity distribution utilities that sources all their needs from coal, an additional P100 tax per metric ton would increase electricity prices by around five centavos per kilowatt hour.

But even more debilitating, from a growing clamor of opposition, is the proposed excise tax on sugar-sweetened beverages (SSB), which Senator Ralph Recto said was the most controversial and sensitive because of its expected impact on large swathes of the population.

He said: “Maraming tatamaan dito. We include the sari-sari stores. We include the D and E consumers who consume these products the most … We are going to hit the consumers, especially the poor, who will not benefit from the tax reduction to begin with.  They will not benefit from the tax reduction, to begin with, and we are going to hit them with P280 billion of consumption tax.”

Recto rightly said that the proposed taxes can very well undermine the spirit of the law as well as its avowed fiscal objective. TRAIN’s burden on the poor, he explained, will consequently require increasing the budget for social protection and social services, not infrastructure.

“[But] if we reduce the burden on the poor, then  there is no need to spend too much on social protection.  We free up that money for the purpose of this measure really is to ‘Build, Build, Build.’ That  is the idea.”

This doesn’t include yet considerations on the proposal’s impact on industry, big and small. At its current form, the bill will disrupt not only the sugar and food and beverage industries but the entire value chain to which they are linked, all the way down to the neighborhood sari-sari and store and carinderia. Millions of jobs are on the line, Recto said.

Unfortunately for consumers, this line of reasoning and Recto’s alternative proposal of P3 per liter of SSB lost by a very close vote of eight to seven. As of writing, the senate version proposes P5 per liter for caloric sweetened beverages, P5 per liter of mixed caloric and non-caloric beverages, and P10 per liter for beverages using HFCS.

This is estimated to translate to the following increases. For powdered juice and iced tea, from P9 to P14 per 1 Liter sachet; for sodas, from P16 to P21 per liter; and for ready-to-drink juice, from P20 to P25 per liter. These are products that low-income earners, with the lowest wages consume every day. As they will not benefit by the income tax reduction of TRAIN, the price hikes, already with big repercussions on an individual’s budget, ought to be multiplied thousands of times, just to have a grasp of how significant this bill is for ordinary Filipinos.

From the point of view of a single minimum wage earner, with present-day expenses and with a very plain lifestyle, you may be able to save a few pesos. Try computing a decent budget for yourself and you will immediately appreciate the financial challenges of our countrymen in the D and E brackets. What more if you are the breadwinner of even a family of three or four?

As the Senate reconvenes to finalize amendments on this high-priority legislation, we can only hope that they carefully consider the burden they are about to impose on all consumers as all these taxes that will increase the cost of fuel, electricity, SSBs and starts pushing inflation rates up.

While the senators are expected to approve their version en route to the Bicameral Conference Committee and eventual signing by the President into law, we hope for a last-minute change of heart from our legislators.

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