IN just two more days, it will be 2020, a new year in which the nation sees such great hopes and expectations. There are also some fears, however, over the possible effects of a law which takes effect on January 1 – the third tranche of the administration’s Comprehensive Tax Reform Program (CTRP) which Congress has enacted into law as the Tax Reform for Acceleration and Inclusion (TRAIN).
The CTRP was drawn up by the Department of Finance to achieve – in the words of Finance Secretary Carlos Dominguez III – “a simple, fair, and more efficient tax system… to promote investments and jobs and reduce poverty.” It called for revisions in the laws on tax amnesty, on income, sin, mining, real property, financial, and motor vehicle taxes.
TRAIN 1 lowered personal income tax rates and imposed new tariff rates, including a tariff of P2.50 per liter on diesel, where there was none before, starting in January, 2018. That was the year, Philippine market prices – inflation – zoomed to unprecedented heights, reaching 6.7 percent in September. Government economic managers claimed it was due to rising global oil prices plus local price manipulation, but the new diesel tariff undoubtedly played a major role in that year’s price debacle.
This year 2019, the second tranche of P2 in the tariff on diesel was carried out but market prices have remained steady. The third tranche of P1.50 in diesel tariff will now be imposed starting January 1, 2020, and some members of Congress – House Deputy Minority Leader Carlos I. Zarate and Rep. Ferdinand Gaite, both of the party-list Bayan Muna, have expressed fears about this third increase in diesel tariff.
It will be imposed at a time when world oil prices are beginning to rise. United States oil inventories are down by 3.39 million barrels, according to the US Energy Information Administration. The Organization of Petroleum Exporting Countries (OPEC) reported it expects a small deficit in the world oil market next year. And with the improving relations between the US and China, the global demand for crude oil for industrial production in many countries is expected to rise. And that means higher world oil prices.
House opposition members Zarate and Gaite have called on the administration to repeal the TRAIN law as they fear it may cause a “price onslaught” that will hit Filipino consumers in the coming year. We hope the price situation will not deteriorate as it did in 2017, but the government must be on full alert as the new year begins.
We may have a confluence of the same factors that caused prices to rise in 2018 – rising global oil prices, local price manipulators, and the increase in local oil prices due to the additional diesel tariff. The government must be ready with measures to ease the impact of any price increase on the poor sectors of the country along with a strict watch against price manipulation by sectors out to take advantage of the situation.
