‘Only solution to inflation: Remove fuel tax’

MANILA, Philippines — With more and more Filipinos reeling from the impact of soaring consumer prices, an opposition lawmaker is pushing for the immediate repeal of “anti-poor” excise taxes on kerosene and diesel as well as other excise fuel taxes under the Tax Reform for Acceleration and Inclusion (TRAIN) law.

“If at all, a repeal of the anti-poor imposition of excise taxes on kerosene and diesel as well as a temporary moratorium on the imposition of all other fuel excise taxes under TRAIN provides the fastest and simplest relief to Filipinos,” Marikina Rep. Romero Quimbo said, adding that measures set in place to ease effects of record high inflation “would take months to be felt by the poorest Filipinos.” Inflation, or rate of price increase, reached a nine-year high of 6.4 percent in August. The figure is seen to rise in September.

“Every week that inflation is unaddressed, countless more Filipinos become poorer and hungrier. We must act now,” Quimbo added.

He reiterated his call for the immediate passage of House Bill 8171, which he authored, seeking to return to zero the excise taxes on kerosene and diesel imposed under Republic Act 10963 or the TRAIN law.

“Recent surveys have confirmed that the issue of rising prices is the top concern of our people. With inflation for September expected to top the already nine-year high 6.4 percent recorded in August, I am dumbfounded by the continuing refusal of our economic managers to consider a more immediate response,” Quimbo added.

His proposed measure also provides for the automatic suspension of fuel excise tax increases under TRAIN when inflation exceeds the government’s quarterly target. The bill is a counterpart to Senate Bill 1798 filed by Sen. Paolo Benigno Aquino IV.

Quimbo said more than four million Filipinos may have become poor due to the runaway inflation, an estimate he based on a study of the Asian Development Bank at the height of the global financial meltdown in 2008, which stated that 2.3 million Filipinos became poor with every 10 percent increase in prices of essential food items such as rice, galunggong (round scad) and vegetables.

“With essentials increasing in price by more than 20 percent in the last seven months, it is fair to say that four million more Filipinos have become poor because of uncontrolled inflation,” Quimbo pointed out.

The House voted 187-14 with three abstentions approving on third and final reading House Bill 8083 or Train 2, renamed Tax Reform for Attracting Better and High-Quality Opportunities or TRABAHO bill. It represents the second package of the Comprehensive Tax Reform Program.

Among its conclusions, the ADB study also found that a similar 10 percent increase in the price of rice leads to an additional 660,000 Filipinos becoming poor while a 10 percent increase in fuel leads to an additional 160,000 new poor Filipinos.

“The impact is clear, beyond just the study, it is felt in the streets, in our markets and in our communities. On behalf of the millions Filipinos now suffering because of this uncontrolled, self-inflicted inflation,” the Marikina lawmaker said.

“Unless this runaway inflation is addressed, instability will happen. We hope that the administration takes a long and hard look at our constructive suggestion and not simply dismiss it because we are not partymates,” he added.

Aquino said administration and opposition lawmakers should work together for the suspension of the excise tax on gasoline as part of addressing the high prices of food and other products.

“Instead of pointing fingers, let’s work together to suspend the additional tax on fuel scheduled for January 2019,” Aquino said.

Instead of focusing on silencing the opposition, he said the government should immediately address the problems at hand, such as high prices of food and rice and lack of job opportunities.

Concerns raised

Meanwhile, business groups decry the lack of government response to their concerns over some provisions of TRAIN 2.

Philippine Ecozones Association (PHILEA) president Francisco Zaldarriaga said Finance Secretary Carlos Dominguez III has not given direct response to a position paper on TRAIN 2 submitted by ecozone investors and locators. TRAIN 2 involves cuts in fiscal incentives being offered by the Board of Investments (BOI) and the Philippine Economic Zone Authority (PEZA).

“We submitted and we try to follow up with them but there is no direct response or reaction to the position paper. Our fear is there seems to be this assumption on the part of the Department (of Finance) that our fears are unfounded,” Zaldarriaga said at the weekly Kapihan sa Manila Bay at Cafe Adriatico in Manila.

“Make the country competitive. You make this country the best place to invest in. Yes, it includes incentives, building infrastructure, eliminating corruption. That should be our focus, not killing the goose that lays those eggs,” Zaldarriaga added.

American Chamber of Commerce of the Philippines (AmCham)’s legislative chairman John Forbes said TRAIN 2 creates uncertainty for existing and new investors as the measure is likely to lead to reduced revenues and job losses on a scale that could damage investor confidence.

“We are concerned about the rationalization of incentives. There are certain provisions that we believe will hurt, if not actually have hurt, already the electronics industry,” Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) president Danilo Lachica said.

“We are not enemies. We are working with the government and we support many of the provisions, except there are certain provisions we believe that will be hurting,” Lachica said.

He said they fully support PEZA’s one-stop shop concept as well as its rules and regulations that have greatly helped businesses in the past 30 years.

“We fully support them and we hope their autonomy is maintained,” he said.

Information Technology and Business Process Association of the Philippines (IBPAP) president and CEO Rey Untal said that while the BPO sector is not totally opposed to TRAIN 2, there are provisions in the bill that they find disturbing.

“There are certain provisions though in existing bill, at least in the one that passed in the Lower House, that we are seriously concerned with and primarily it tackles the part around the eventual rationalization of the tax incentives,” Untal said.

“People talk about the issue and impact of TRABAHO bill on the industry when it is implemented but in reality we are already affected now by the uncertainty of where all of these discussions will end up with,” he said.

A diplomat at the Japan embassy in Manila said TRAIN 2 gives “anxieties” to Japanese companies in the country, particularly the rationalization of the tax incentives for PEZA companies.

“There are some concerns that they will be affected by the TRAIN 2 or Trabaho, particularly the rationalization of the tax incentives in PEZA,” minister and deputy chief of mission Takehiro Kano told a select group of reporters at a press briefing.

“The Philippine government rationale is they’ll decrease the corporate tax and they can’t continue the tax incentives in the PEZA forever,” he added.

He said companies consider various factors – including tax incentives – in making investment decisions. – with Paolo Romero, Pia Lee-Brago