Tax reform and price increases
TAXATION is a means for a nation to mobilize local resources to fund the programs and operations of its government. Too heavy reliance on foreign loans or other schemes with big foreign players could threaten long-term national interest. While we can always question the wisdom of the priorities of project implementation and how the government conducts its business in general—are we getting value for our tax money?—substantial funds are obviously needed for even just the most basic of services such as education and health care, among others.
The Tax Reform for Acceleration and Inclusion (TRAIN) that took effect on January 1, is expected to raise an additional P90 billion for the government in 2018. This isn’t really that much when compared to the P3.8 trillion national budgetfor 2018 and the total revenue target of P2.8 trillion. But every peso counts.
On the downside of the new taxes is the fact that the increased excise taxes on fuel will have an fuel is used in production and transportation of goods. The full was 3.2 percent, much higher than the 1.8 percent in 2016. This might not seem as much but for millions of Filipinos even the smallest increase in prices is felt. For them, every centavo counts. While tax payers will enjoy lower tax rates—6.8 million taxpayers will be completely tax exempt—the very large group of Filipinos who earn their living in the informal economy will feel the impact of higher prices without the matching increase in take- home pay. For perspective, the Philippine Statistics Authority puts the total number of employed Filipinos at
The International Labor Organization (ILO) estimates the number of Filipinos in the informal sector to be about 38 percent of those employed. This is only an estimate, and the ILO refers to the group of workers as being employed in “vulnerable forms of employment” with neither formal work arrangements nor access to social protection.
The World Bank in a paper from September 2012 sets the figure much higher: “All in all, informal - cent of total employment.”
“These informally employed workers face varying degrees of vulnerabilities to income and price shock,” the paper said. Most of these workers are found in agricul - ing to the World Bank, millions of Filipinos are vulnerable to poverty poverty line.” Price increases in basic goods and services could instantly push such families below the poverty line.
- expected from the excise taxes, and the fact that millions of Filipinos are already struggling to make ends meet, the government will give subsidies to 10 million poor households ( out of 23 million households in the Philippines) as a short-term relief to help these families cope with the anticipated price increases. An unconditional cash subsidy of P2,400 per household will be given in 2018 to 4.4 the PantawidPamilyang Pilipino Program (4Ps) and to an addi not covered by 4Ps. Those not already enrolled in Philhealth will be enrolled to avail of the free or subsidized health care services.
The initial effects of the new excise tax on diesel and the increased tax on coal will soon be felt, at least in Cebu. Julieto Flores of the Cebu South Mini-Bus Operators Association announced that the original approved minimum fares effective February 1 – for some time the bus operators have been - P1 charge for every succeeding kilometer. The organization might the fare for succeeding kilometer price increases ( January 6, 2018).
The Visayan Electric Company which supplies electricity to Metro Cebu is expected to collect an additional two to four centavos per kilowatt hour starting next month. The company sources about 40 percent of its power from coal than the national average which electricity prices as a result of the higher excise tax on coal could be bigger in other parts of the country where the share of electricity gen is higher than it is in Cebu.
Minimum wage earners could see their additional take-home pay eaten up by these price increases.
With TRAIN in effect, the ball is now in the government’s court. It must deliver on its promises of in the ordinary Filipino, and improved basic services and social protection.