Commentary: Good things don’t always come in big TRAIN packages

Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act became effective on Jan. 1, 2018 which provided for increases in the coal and oil taxes, sugar-sweetened beverage taxes as well as the imposition of the VAT in transmission.

For millions of Filipinos, this plainly means an escalation of food and beverage, electricity and fuel prices, which are added on top of their daily consumption and commute.

Numbers don’t lie: Increase, increase, increase!

To be specific, there is an increase of excise taxes on domestic or imported coal at the rate of P50 per metric ton in 2018, P100 per metric ton in 2019 and P150 per metric ton in 2020.

For oil, there will be a progressive increase of P7, P9 to P10 per liter for unleaded and premium gasoline and P2.50, P4.50 to P6 per liter increase for diesel in 2018, 2019 and 2020, respectively. Kerosene will hike up by P3, P4 to P5 per liter while the prices of LPG will be raised to P1, P2 to P3 per kilogram in 2018, 2019 and 2020.

The TRAIN also provided for a new VAT imposition in the inclusion of sale of electricity by generation companies, transmission by any entity, and distribution companies, including electric cooperatives at the rate of 12 percent. 

For the sugar-sweetened beverages, the first package imposes a tax of P6 per liter of volume capacity on sweetened beverages using purely caloric sweetener, purely non-caloric sweetener, or mixture of both. Meanwhile, a tax of P12 per liter of volume capacity is imposed on those using purely high-fructose corn syrup or in combination with any caloric or non-caloric sweeteners.

Impact on consumers

Based in the figures provided by the Department of Energy, the price increase of petroleum products in the first tranche of January 2018 are as follows: P2.97 per liter for gasoline; P2.80 per liter for diesel; P3.36 per liter for kerosene and P1.12 per kilo for liquefied petroleum gas.

Concurrently, the direct impact of electricity increase is in reflected on the blended generation charge attributable to additional excise tax on fuel and the transmission charge, which is now subject to VAT. Data from the Energy Regulatory Commission gathered from the December 2017 Meralco electricity rate components provide that the generation charge which previously amounted to P4.6045 per kilowatt hour will increase by P0.0113 (now P4.6158 per kWh). With the implementation of the TRAIN, VAT on transmission charge now amounts to P0.683 per kWh. 

For an average residential household consuming 190 kilowatts per hour, there will be an additional P13.30 in the monthly bill as there will be a total increase of P7 centavos per kWh for the Meralco franchise. For provinces which have electric cooperatives relying on 100 percent supply of coal, the increase will be P9 centavos per kWh. These increases will be partially reflected in the February bill, but its full impact may be felt in the March billing.

READ: Winners and losers: How the TRAIN law affects rich, poor Filipinos l How Duterte's new tax law can affect you

Consumers’ plea for protection

As the government rolls out its first of many tax packages, Filipinos plea for protection. In this first package alone, consumers are now faced with the reality of carrying a bulk of the tax burden as it affects their day-to-day living expenses.

While there is an exemption of personal income taxes for individuals with a taxable income of P250, 000 or less, the TRAIN, at the same time, raises taxes on coal, fuel, cars and sugar-sweetened drinks. Many Filipino consumers have expressed the worrisome effect of the TRAIN as the increase in their earnings would only go to the additional cost of goods and services.

Reports of inadequate consumer protection in view of the implementation of the TRAIN adds to the problem. The public needs to be prevented from abuses or profiteering acts in the form of premature increases from recent oil and electricity price hikes as the government rolls out its tax reform package.

Further, it also remains uncertain if the poorest 10 million Filipino households will be protected from the impact of increases in prices by way of the Unconditional Cash Transfer (UCT) of the Department of Social Welfare and Development (DSWD) which will be implemented for three years starting end of the January. In the UCT scheme, there will be a release of P2,400 (P200 per month) in 2018 and a total of P3,600 (P300 per month) in 2019 and 2020. 

Getting the most out of the first package

While the government is laudable in its intent to correct the deficiencies in the tax system, levying new taxes and/or increasing the tax rates is not the sole solution to the problem. Before any more tax packages ensue, the Filipinos must first be sure that they are getting the most out of the first package. The strict implementation of government policies, by way of effective tax administration and collection, is key and will negate the need for the imposition of new and/or higher taxes.

As the government prepares for TRAIN 2+, on taxes on tobacco, alcohol, mining and gambling by the end of January, TRAIN 3 on property taxes by the end of 2018 and TRAIN 4 on taxes on investments in 2019, the inflationary effects of the taxes to the average Filipino consumers must be carefully considered.

Just recently, the Bangko Sentral ng Pilipinas said that it may have to reassess its inflation rate forecast, taking into consideration the possible impact of the recent increase in crude oil prices movements of the peso and price adjustments associated with the implementation of the tax reform program.

All told, consumers call for the government to address the loopholes in the tax system through efficient tax administration and collection, not by way of new taxes. 

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Lawyer Hannah Viola is a convenor and legal counsel of CitizenWatch Philippines and a fellow of the Stratbase ADR Institute, a partner of Philstar.com.