A consumer group on Monday warned inflation could stay above the 4 percent target due to the imposition of excise taxes on crude oil.
Victorio Dimagiba, president of Laban Konsyumer Inc. said in a statement his group “fears that the inflation for 2019 shall remain high and above the target of 4 percent.”
Dimagiba said last year’s inflation—which reached 5.2 percent and the highest in 10 years—could be blamed to the “continuing implementation of the excise taxes on fuel.”
Because of the Tax Reform for Acceleration and Inclusion (Train) lawl , excise tax on diesel and gasoline increased from zero to P2.50, P4.35 to P7 in 2018 and will rise to P4.50, P9.00 this year and P6, P10 in 2020 respectively.
Dimagiba said that while crude oil prices went up last year, it was not the main driver of high inflation. “Just as crude oil prices went high quickly in the third quarter of 2018, crude oil prices went down as fast in the fourth quarter. Yet, inflation had remained high and above the government target,” he said.
The December 2018 inflation “could have been lower than 5.1 percent but it was not because of the excise taxes,” Dimagiba said. “The train law imposed an excise tax in a fixed amount per liter of fuel, irrespective of the value of the crude oil, that increases over a period of three years for everybody. The law did not consider the ability to pay of the consumers and that the excise taxes imposed by the law did not depend on the resources of the consumers affected,” he added.
Dimagiba explained that, “For every layer of the supply chain, which could be anywhere from 5 to 7 layers, as well as in the production, manufacturing, and transportation of the basic necessities and prime commodities, these fixed taxes are passed on to the costs of the goods and services produced and sold at least 5 to 7 times.”
He said the new Congress in June 2019 should revisit the Train law and introduce an “equitable and progressive tax reform policy.” The LKI will also continue to pursue the pending petition in the Supreme Court against the law, he added.