Those who issued the warning were dismissed as doomsayers. Wealthy public officials who charge their fuel expenses and many other personal expenditures to taxpayers said any inflationary effects would be minimal.
Now lawmakers are reportedly set to conduct an investigation on the inflationary effects of the Tax Reform for Acceleration and Inclusion or TRAIN law, particularly the hefty excise taxes slapped on fuel and energy. And officials are scrambling to reduce the impact on the masses of spiraling prices – the fastest increase in years.
There was minimal opposition to the tax reforms, which are meant to finance the government’s ambitious “Build Build Build” infrastructure program. Build Build Build is envisioned to generate jobs and livelihood opportunities. People liked the promise of income tax cuts and higher taxes on products that impact on public health such as tobacco and sugar-sweetened beverages. But warnings were issued on the inflationary impact of the excise taxes on fuel and energy. In certain developing countries, fuel is considered a political commodity, with prices even subsidized because of the impact of fuel costs on inflation.
Taxing fuel, however, is an easy way of raising revenue, and all warnings were disregarded. Today, fuel prices are nearly double the rates in December. With higher transport and logistics costs inevitably passed on to consumers, combined with higher power costs, prices of all basic goods have gone up. Hardest hit are the poorest of the population, most of whom don’t pay income taxes but like everyone must bear the burden of value-added taxes.
Defenders of the taxes say the inflationary pressure will be temporary, but consumer prices rarely go down in this country. The inflation rate dampened jubilation yesterday over the 6.8 percent economic growth rate in the first quarter of the year. The country has enjoyed sustained economic growth for many years, but making the growth inclusive remains a challenge. Galloping consumer prices make the challenge even tougher.