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New taxes merit review in face of rising prices

PRICES have been rising since January this year. The Department of Finance said the inflation rate has now hit a three-year high of 4.5 percent, when the target range of the Bangko Sentral ng Pilipinas was only 2 to 4 percent.

Because the price – or inflation rate – increases began in January, they have been blamed by some on the government’s Tax Reform for Acceleration and Inclusion (TRAIN) Law which took effect in January. Officials, however, claim that the TRAIN Law accounted for only a minor part of the price increases. Of the 4.5 percent increase, they said, only .2 percent is due to the higher sin taxes on cigarettes and liquor, and .4 percent to the higher taxes on fuel. Most of the 4.5 inflation increase, they said, is due to market forces, including worldwide oil price increases and depreciation of the Philippine peso.

Long before the TRAIN Law was enacted, we had expressed fears that the tax increases on diesel and other fuel were bound to boost the prices of consumer goods of all kinds. Diesel fuels cargo trucks which bring farm products to city and town markets. Diesel also fuels passenger buses which are bound to raise passenger fares.

The TRAIN Law enacted last year is only the first scheduled by the administration. TRAIN 2 is now being readied for filing in Congress and it includes further increases in the prices of sin products like liquor and cigarettes, according to Finance Secretary Carlos Dominguez III.

There is further bad news from the oil companies which imposed last Tuesday hefty increases on diesel, gasoline, and kerosene, as world prices rose on fears of potential disruption of oil flows from Iran. The United States had announced last week that it would impose new sanctions on Iran after rejecting a 2015 agreement that had curbed Iran’s nuclear development activities.

In the face of these developments, the government should take a second look at the TRAIN Law. It is supposed to benefit ordinary taxpayers through lower tax rates, but millions of unemployed Filipinos will be suffering from consumer price increases resulting from higher diesel taxes.

There are further packages of the Comprehensive Tax Reform Program set to be enacted into law under TRAIN 2 and succeeding bills. They will surely boost the country’s fiscal position as projected in the Gross Domestic Product which is expected to expand by 7 percent. But these too merit a close second look in the wake of the unexpected 4.5 percent rise in inflation now being felt by the consuming public.