CEBU, Philippines — With the implementation of the first package of the tax reform program starting this month, a top retail industry official has warned that the law could significantly push up prices of basic products, particularly affecting those living below the poverty line.
Philippine Retailers Association-Cebu President Robert Go said the increased excise tax imposed on sweetened beverages will have a huge impact on the daily consumption of poor consumers.
"These items are mostly consumed by the poor and mostly sold in sari-sari stores," Go told The FREEMAN.
The increase will likely result to the decrease in consumption of these products, he said.
Under Republic Act 10963 otherwise known as the Tax Reform for Acceleration and Inclusion (TRAIN) which was signed by President Duterte on Dec. 19, 2017, a P6 excise tax per liter is imposed on sweetened beverages with caloric and non-caloric sweetener while P12 is imposed on those with high-fructose corn syrup.
"Since a 30 percent increase in excise tax is huge, the P6-12 tax might just double the price of these products," Go said.
He noted manufacturers of these products could also be affected as sales will likely decrease, thus they will have to cut their production volume.
He said manufacturers of soda have already announced price increases in their products.
"Overall the economy will see a big inflationary effect. And GDP (gross domestic product) will slow down in the early months until adjusted," the retail official said.
Furthermore, PRA's Go also warned the rise in excise tax on fuel products will also raise transportation costs.
Under the TRAIN Law, a P7 excise tax is imposed on per liter of gasoline products which will eventually increase to P9 and P10 in 2019 and 2020, respectively.
On diesel products, the excise tax is P2.50 per liter for 2018, P4.50 per liter next year and P6 in 2020.
"This will surely increase jeepney and bus fares, and increase all other products because of logistical cost, production cost and inflationary on all basic products," Go further warned.
He sees that inflation will significantly increase this year.
"All manufactured goods and farm basic goods are expected to jump up in prices," said Go, who is owner of Cebu-based retail chain Prince Retail.
He also cited the increased tax on coal will also push up electricity rated considering that most of the country's power plants are coal-fired.
He said everyone is likely to be affected, with the impending increase in electricity and consumer good prices.
"We don’t know how shocking our electric rates will be and the increase in consumer goods," he noted.
Go also sees a slowdown in sales of luxury cars costing P4 million and above which are imposed with a 50 percent increase in tax; and 20 percent tax on cars costing P1-P4 million.
"Dealers will have to reassess their viability especially for high-end car dealers," he said.
However, the good news the new tax law brings is that many employees will take home their salaries in full, without tax deduction, the next payday this January.
This is pursuant to the revised withholding tax table issued by the Bureau of Internal Revenue (BIR) through Revenue Memorandum Circular (RMC) 105-2017 which cites that there is no withholding for those receiving P685 daily wage; P4,808 weekly wage; P10,417 semi-monthly wages; or P20,833 monthly wage.
Cebu Bankers Club past president Maximo Eleccion believes the tax reform bill is much needed to sustain the country’s economic growth and to finance the infrastructure program of the government.
"Overall this is good for the economy. On the part of the employees, while take home pay would increase, this will just be offset by the rise in prices due to increase in excise taxes on gasoline and coal," the bank official said.
"Prices of basic commodities would surely increase as well as power," he said.
"BIR should be efficient in collecting taxes so that we would enjoy the full benefits of this law. For business, they can pass on the increase in taxes to their consumers in terms of increase in prices, the consumers will have to carry the burden," Eleccion warned.