Palace counters economic experts on tax reform's impact on prices

PRESIDENTIAL Spokesperson Harry Roque Jr. on Wednesday, February 7, said it is premature to blame the new tax reform law for the increase in consumer prices.

"I think, it's too premature to come up with such conclusion. We only implemented it (tax reform law) last January and we did not immediately slap (excise) taxes (on a number of products)," Roque told Palace reporters in a phone patch interview.

He was reacting to the statements of Socioeconomic Planning Secretary Ernesto Pernia and Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. that the implementation of the Tax Reform for Acceleration and Inclusion (Train) Act pushed up prices of non-alcoholic beverages and alcoholic beverages and tobacco.

The Philippine Statistics Authority (PSA) on Tuesday reported that inflation rate accelerated to 4 percent in January, higher than the 3.3 percent posted in December 2017 and the 2.7 percent in January 2017.

This hit the upper band of the government’s 2-4 percent target range for the year.

“The push in inflation is partly due to Train, considering particularly the excise on fuel and additional sin taxes,” Pernia said in a statement on Tuesday, February 6.

On the same day, the Bangko Sentral issued a separate statement attributing the uptick in headline inflation for January was traced mainly to the surge in prices of food and non-alcoholic beverages, alcoholic beverages and tobacco items as well as domestic petroleum products.

The central bank said the higher prices of these commodities were due to the implementation of the Train law.

"At the same time, transport inflation also increased due to adjustments in gasoline and diesel prices, largely influenced by higher international prices of crude oil and the excise tax on petroleum as prescribed by the Train Law," the central bank said.

Pernia, however, said the effects of the Train law would be "minimal and temporary."

The commodity group of alcoholic beverages and tobacco—comprising only 2 percent of the consumer basket—recorded a double-digit inflation, up to 12.3 percent from 6.4 percent in the previous month.

The food and non-alcoholic beverages segment, which constitutes 39 percent of the consumer basket, also posted a 4.5 percent increase, largely due to the lingering effects of the typhoons that hit the country in the last quarter of 2017.

The PSA, in a separate statement, said "the implementation of Tax Reform for Acceleration and Inclusion Law this month raised prices of cigarettes and alcoholic beverages in most of the regions."

"Meals eaten outsides the home and some items for personal care also went up in many regions. Higher global crude oil prices caused prices of gasoline and diesel to shoot up during the period. Upward adjustments in the ship fares were likewise seen in many provinces," it added.

Roque said he believed there are other factors that contributed to the surge in prices.

He also stressed that it would take some time to feel the impact of Train Act.

"We need to wait longer to see the over-all effect of Train (law)," he said. (Ruth Abbey Gita/SunStar Philippines)