Tax concerns make biz less bullish this quarter

MANILA — Businesses turned less optimistic about prospects as 2018 opened amid worries about the impact of the tax reform law particularly on fuel prices, according to results of a recent central bank survey.

Business confidence slipped to 39.5 percent in 2018’s first three months from 43.3 percent logged in the fourth quarter of 2017, according to results of the latest Business Expectations Survey (BES) which the Bangko Sentral ng Pilipinas (BSP) conducted last Jan. 8-Feb. 22. The latest reading was also just slightly better than the 39.4 percent of 2017’s first quarter.

The confidence index is computed as percentage of respondents who answered in the affirmative less those who responded in the negative when asked on specific indicators.

BES data since at least 2013 show the slump follows a seasonal dip after the Christmas holidays that is followed by a secondquarter rebound.

The central bank said respondents — representing 1,469 companies nationwide — were less upbeat about the economy during the quarter as they expected the usual slowdown in business activity, as well as tempered consumer demand following the holidays and harvest season. They also expected stiffer competition and rising fuel prices to dampen sales in January-March.

Companies also grew cautious as they anticipated the impact of Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) law that took effect Jan. 1.

“Concerns cited by respondent firms over the transitory impact on consumer prices with the implementation of the Tax Reform for Acceleration and Inclusion law may have contributed to the lower outlook, although a significant number of businesses surveyed also mentioned the positive impact of the tax reform,” Rosabel B. Guerrero, senior director at the BSP’s Department of Economic Statistics, said in a press briefing on Friday.

TRAIN introduced additional taxes on fuel, cars, coal, sugarsweetened drinks and a host of other items, while cutting personal income tax rates.

Among others, the new law imposed an additional P2.50 excise tax per liter of diesel and P3/liter for kerosene at a time of three-year highs for world crude prices.

The central bank bared the results a day after the release of the latest Nikkei Philippines Manufacturing Purchasing Managers’ index, whose survey was conducted Feb. 12-21, baring a 50.8 reading that — while signalling “marginal” improvement in factories’ businesses from January — was the lowest in five months and the second-lowest since IHS Markit began the Philippine survey in January 2016. Respondents “mainly blamed new excise taxes, higher commodity prices… supply shortages and a weak peso for increased input costs,” IHS Markit said in its report last Thursday.

BSP Deputy Governor Diwa C. Guinigundo said in the same briefing that respondents were the ones who cited TRAIN as a key factor in first-quarter BES results.