Running scared

You know we have a problem if business executives are more worried about the business environment than enjoying the Yuletide season. Instead of ticking off  “must attend parties,” a number of company presidents and CEOs have been preoccupied meeting with government officials, stakeholders, crisis managers, consultants as well as opinion leaders. Instead of singing Christmas carols they are silently humming “I Will Survive” as if to reassure themselves and they all have reason to be worried.

The car manufacturers and dealers are running scared or panicked over plans of Congress and government to impose an excise tax designed to curb or reduce sales of vehicles as the solution to reducing further traffic congestion. Cigarette company executives are puzzled and dismayed when Congress passed a bill perceived as sabotaging the Sin Tax law that provides for a single tax rate on all brands effectively removing predictability in business and encouraging smugglers and counterfeiters to ramp up their tax evasion. A growing number of small and medium companies have shared how their employees have been emboldened, turned militant with the aid of the KMU that has found new strength in their influence and contacts within the Duterte administration. A number of mega corporations feel time and opportunities slipping by as the government remains indecisive and with no real plans and targets in the area of infrastructure projects. Employers and employees are caught in bitter tangle over whether or not President Duterte will be wishy-washy about ending “contractualization” or “endo.” The rest of us are simply wondering when government and Congress will start asking investors and stakeholders about their concerns, suggestions, compromise and areas of possible cooperation.

As far as the proposed excise tax on vehicles, this knee jerk reaction of government and Congress has certainly upset the car industry as well as buyers because cars and commercial vehicles and “road use” is one of the most taxed products and industries. In addition to heavy taxation, the government has not fixed the need for a single tax formula or level playing field for car makers. The US-European car makers pay higher taxes in the absence of trade treaties or agreements while Korean and Japanese brands enjoy special rates as a result of treaties and trade agreements. The knee jerk excise tax will make things worse for the European brands and may ultimately price them out of the market.

Ironically even some of the Japanese car makers are now seriously studying cost cutting measures, job cuts and possibly limiting their volumes and operations in the Philippines with the option of simply maintaining a small presence in the country but no longer considering commercial quantities. This is not far fetched when one compares sales data between the Philippines and our neighbors in Asean registering maybe 10% compared to Thailand etc. Major brands have left in the past and at the rate things are going, they might end up doing it all over again.

Making matters worse is the fact that the industry has heard and read about the government’s plans but they have not been consulted or even been invited to be part of working groups or committees. Car makers and dealers can’t even properly plan, forecast or put in stock orders because everyone is in the dark and guessing if the excise tax will push through, how much, and when? Yes the government will get what they want: less cars sold. But what if they get more than they bargained for? We taxed airline companies and charged over time for immigration services. After complaining and asking for help and getting none, they left and now have their hubs in Taiwan and Thailand, all to our disadvantage especially our OFWs in the Middle East and Europe.

Now there is the mysterious move of Congressmen under the “Northern Alliance” that will sabotage the existing SIN Tax Law that takes effect on January 2017. Under that law there will only be one rule – one value for cigarette taxes to start at P30.00 per pack with provisions for inflationary adjustments every year after 2017. While the cigarette people opposed the tax, it was inevitable and provided “predictability” for business decisions so they adapted a “Live and let live” attitude.

But even before the Department of Finance gets a chance to implement the “unitary” or single rate, Congress delivered a miracle bill reportedly rolled out under 60 days, proposing to scrap the law that will be effective in January 2017 and going back to the two-tiered or two tax rates for low end and high end cigarettes. On face value the miracle bill wants higher taxes at P32 tax per pack for “masa” brands and P36 for high end brands. But anti-smoking advocates are not fooled by the higher tax proposal because their intelligence work and research have shown that higher taxes are only good if all manufacturers comply and pay taxes or if the government has the means and political will to go after tax evaders, smugglers, and those who produce counterfeit cigarettes and (worst of all) those printing and attaching FAKE tax stamps found in 9 out of every 10 packs of certain brand cigarettes sold in the CALABAR Zone and Mindanao.

I have reason to believe that some people are trying to delay the implementation of a unitary tax system on cigarettes. I won’t be surprised if a company gets a TRO claiming there is a “law” that just passed Congress and needs to be finalized before the DOF can implement the current law in 2017. If my hunch is correct, the delay will mean turning tax payments into profit instead.

The American Pioneers rebelled because of “Taxation With No Representation.” In the Philippines, businesses simply close shop, invest abroad or patiently wait for a new administration. That’s what a number of businessmen did versus the KMU. Chinese companies migrated to Canada due to kidnappings. Airlines and auto makers packed up. All that should not happen all over again if there is consultation and proper representation before taxation or appointing militants in government who do more damage to the economy because of their blind leftist militancy. Inviting investors must be supported with real policy, effort, predictability. Focus on the ECONOMY!

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