The Duterte administration’s announcement that it will suspend the next round of fuel excise taxes will not lower current high prices and at best only lessens TRAIN’s inflationary impact next year, research group IBON said. It is however a welcome admission of the inflationary impact of the Tax Reform for Acceleration and Inclusion (TRAIN) law, said the group. Yet while it is very much needed, the public deserves more meaningful policy steps to lessen inflation and its impact, stressed IBON.
The country’s economic managers recently recommended to Pres. Rodrigo Duterte the suspension of the January 2019 round of oil excise taxes. IBON however pointed out that the announcement is mainly to give the illusion of executive action to ease inflation rather than a new bold step. TRAIN stipulates that additional fuel excise taxes should be suspended when Dubai crude prices based on the Mean of Platts Singapore breach the US$80 per barrel threshold for three months prior to a scheduled excise increase.
Suspending not just looming oil taxes but also those implemented since the start of the year would have been more decisive, the group said. The government is announcing the suspension in advance to give the impression of action now and because they know oil prices will stay above the US$80 threshold. The public has been clamoring to suspend all TRAIN levies but the Duterte administration has been brushing these aside.
IBON said that the fuel excise tax suspension is needed but far from enough to lower prices or ease the inflationary burden on the poor. Keeping existing oil excise taxes since January 2018 means that the high prices they cause will remain, IBON stressed. As it is, the group estimated that each of the country’s poorest 60% of households have already lost at least Php1,800 to Php4,725 since the start of the year due to inflation.
More and bolder measures are needed to give relief to low- and middle-income families, said IBON. Short-term measures include price ceilings on basic commodities, such as but not only rice, and raising wages substantially. There should be a crackdown on exploitative and profiteering traders. The inflationary tax components of TRAIN especially its oil excise taxes should also be immediately suspended.
These should be accompanied by strategic action, said IBON. Government should strengthen Philippine agriculture and local industries to ensure stable and affordable supplies of food and other basic goods. The domestic oil industry should be regulated responsibly including through active state participation and intervention. The government should repeal TRAIN and raise revenues with a genuinely progressive tax system of higher direct taxes on the rich and those with the ability to pay rather than with higher consumption taxes on the poor. ###
