New realities of TRAIN
BIZLINKS - Rey Gamboa (The Philippine Star) - January 23, 2018 - 12:00am

Oil prices are going up like crazy. Analysts have reasoned that the recent rise of crude oil to over $63 per barrel due to the continued drawdown of stock inventories in the US is temporary, but the average for the year will still be higher, albeit slightly, than last year’s.

According to the US Energy Information Administration, Brent crude oil will average at $54.1 per barrel this year, up from $52.4 per barrel last year. But for consumers who benefited from a low of $44 per barrel crude price last year, the translation at the pumps of $63 per barrel today is jarring.

For Filipinos, the higher-priced crude is made all the more difficult to accept because of the new excise taxes, not just on gasoline, but even on fuel products that had been subsidized for decades – diesel oil, kerosene and liquefied petroleum gas.

If the US EIA is correct, we should see a correction towards the middle part of the year when the OPEC oil production cuts will have been lifted and the recovery of US shale oil production continues to shore up US crude oil stock levels.

So, my friends, unless there’s a major supply crisis in the world crude market this year, we should see pump prices dropping significantly towards the latter part of the year, although still higher than what we experienced last year.

Higher inflation rates

Inflation is another matter, though. Aside from the increase in crude prices, the effect of the government’s tax reform program, particularly on the power rates, transport fares and food prices, as well as the weaker peso and higher public spending will exert some pressure on 2018 inflation rates.

The Bangko Sentral ng Pilipinas released the results of a survey made on the views of economists and private banks, and the consensus indicated a minor uptick in the inflation rate this year at 3.6 percent from 3.4 percent last year.

While this simply confirms what the BSP had earlier announced, this is definitely not the same as the 1.41 percent and 1.78 percent inflation rates of 2015 and 2016, respectively. In fact, last year, without the new taxes, Filipinos were already experiencing higher consumer prices.

This, of course, slightly spoils the payday “bonanza” that most employees earning P250,000 a year and below now enjoy when the reformed tax law raised personal income tax exemptions. They may have a slightly higher take-home pay, but the cost of a number of essential goods also increased.

Over the long term, should the government’s Build Build Build program really strengthen the Philippine economy with massive infrastructure projects, then all these “inconveniences,” including worsened traffic in the metropolis, would be worth the wait.

‘Lost’ revenues

One surprising development in the government’s Tax Reform for Acceleration and Inclusion Act (TRAIN) is regarding automobile taxes. If the government was intent on raising revenues for its Build Build Build program, why lower taxes on luxury vehicles?

Vehicles with a suggested retail price higher than P2 million are now actually more affordable, thanks to the new law. A Toyota Alphard that used to sell at P3.28 million is now priced below P3 million and cheaper by more than P300,000.

Meanwhile, the price of the dream cars of our struggling salaried workers has increased by a few thousand pesos. While there are many ways of justifying this increase, including citing the new personal income tax exemptions, it does not warrant reducing taxes on luxury vehicles.

The government may earn more from taxing the poor, but this does not mean the rich should be taxed lower — especially if this involves the acquisition of a fourth or fifth high-end car.

We are still a developing country, and the expected rise in luxury automobiles in our crowded streets shows the continued failure of government to consider inclusive growth in its agenda.

Case for Rappler

The last topic that deserves to be tackled in this column is the revocation of Rappler’s registration with the Securities and Exchange Commission.

Now that the SEC has ruled that some of its Philippine Depository Receipts, or derivative instruments that derive the value from equity, are in violation of the Philippine foreign equity restrictions requiring 100 percent Filipino control over a media entity like Rappler, a curing period should have been looked into.

On Dec. 22, 2017, Rappler submitted a piece of paper stating that the holders of PDRs are waiving their rights to the control provision, specifically of the PDR issued to the Omidyar Network which had provisions that granted a measure of control over Rappler Holdings and Rappler Inc.

Since the Rappler submission was not authenticated, the SEC should have given the media organization time to submit an authenticated statement. In the same breath, the SEC should have asked Rappler to correct the disputed environment where Omidyar’s PDRs had a provisional condition that Rappler and Rappler Holdings cannot alter, modify or change their Articles of Incorporation and Corporate By-Laws without discussion and approval of a least two-thirds of holders of all issued PDRs.

If Omidyar has not exercised its right to any alteration, modification or change in the Rappler incorporation papers, it is not too late to introduce measures that will ensure that Rappler remains truly 100 percent Filipino-controlled.

While Duterte trolls may disagree, Rappler continues to serve as a credible institution that strives to preserve what is so importantly stated in the preamble of our Constitution.

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