MANILA, Philippines – Royd Agapito (not his real name), a 25-year-old market analyst for a research firm, got what he wanted: higher take-home pay. But what he did not expect is a higher monthly household bill that would offset the gains he would receive from the newly-implemented Tax Reform for Acceleration and Inclusion (TRAIN) law.
The administration of President Rodrigo Duterte started 2018 by implementing TRAIN, which reduced personal income taxes but increased those on cars, tobacco, sugar-sweetened beverages, and fuel.
Payroll managers have started adjusting their systems to reflect the new withholding tax rates. Supermarkets, oil retailers, convenience stores, and even sidewalk vendors have begun updating their price lists.
A visit to Puregold supermarket on Monday, January 8, showed that a pack of Marlboro Black 20s is more expensive now at P87.50, from last year’s P68.
By mid-January, motorists will also have to brace for higher fuel prices, once existing petroleum stocks of retailers are used up. (READ: Filipinos to feel impact of higher fuel tax starting mid-January)
Higher fuel prices will also have a trickle-down effect on public transport service providers, which have started seeking fare hikes. (READ: Grab files petition for 5% fare hike and Fare hike? Uber to gauge impact of new taxes first)
Agapito, who earns P30,000 monthly, will save P3,438 a month because of the new withholding tax rates. But he said he decided to stick to his old Toyota Vios instead of upgrading to a new car, given the hike in auto excise tax, which mainly hit mass market vehicles. (READ: Honda Philippines raises prices for most cars due to tax reform)
“I don’t think TRAIN will provide significant impact to an average wage earner. It is like the government is just giving us a new perspective to look at our taxes. You have higher pay, but electricity, transport, grocery bills will also be higher,” Agapito said in an interview.
He added that he would also need to cut down on soda to save money. (READ: Existing stocks of sweetened drinks exempt from new tax rates – DTI)
Starting mid-January, the retail price of a one-liter bottle of Coca-Cola, for instance, is projected to increase to P43 from the current P31, an increase of P12.
This is because of the P12-per-liter tax on drinks using high fructose corn syrup. For drinks using sugar and artificial sweeteners, a P6-per-liter tax has been imposed. However, all kinds of milk, 3-in-1 coffee, natural fruit juices, vegetable juices, and medically-indicated beverages are exempt.
While power distributors, oil companies, fuel retailers, and tobacco manufacturers are directly affected by TRAIN, First Metro Investments Corporation vice president Cristina Ulang said they have one thing going for them.
“The additional burden is something they can pass on to consumers,” Ulang explained.
This, however, does not hold true for small-time vendors in the Philippines, like 48-year-old Meanne Reyes, who has two kids.
Reyes, who sells sugar-sweetened drinks, snacks, and tobacco along Amang Rodriguez Avenue in Pasig City, said she has fewer stocks due to TRAIN.
“Dati P5 per stick lang ‘yung Marlboro. Ngayon binebenta ko na ng P7 isa. Dahil mas mahal na ‘yung pakete, binawasan ko na lang ‘yung pagbili ko ng supplies. Ang taas nang itinaas. Paano naman kaming walang suweldo at pagbebenta ang kabuhayan?” Reyes asked.
(Marlboro used to be P5 per stick. Now I’m selling it for P7 each. Since an entire pack is now more expensive, I was forced to buy fewer supplies. The price hike is significant. What will happen to people like me who have no fixed income and depend on sidewalk vending to earn a living?)
Protecting from impact
To protect the poor from higher prices of commodities, Finance Secretary Carlos Dominguez III said the Department of Social Welfare and Development (DSWD) is mandated to provide targeted cash transfers to the poorest 10 million households.
Each household would get P2,400 per year in 2018, as well as P3,600 per year in 2019 and 2020.
Dominguez said the cash transfer will be implemented in the 1st quarter of 2018.
“DSWD will identify beneficiaries based on the [list] – the Pantawid Pamilyang Pilipino Program and the social pension beneficiaries. The budget for the unconditional cash transfer is included in the 2018 budget, totaling P25.7 billion,” the finance chief said in a Malacañang briefing.
Over the course of 5 years, Dominguez said the government will raise over P786 billion in revenues because of TRAIN.
“These revenues will fund the President’s priorities: social and infrastructure programs. In package one, Congress passed two-thirds of the needed revenue for 2018 and this is expected to pass the balance in early 2018 to help us achieve our revenue deficit targets,” he said.
The finance chief added that the 2nd package of the comprehensive tax reform program, which is set to be passed within the month, is seen to lower corporate income taxes and modernize fiscal incentives.
All in all, Dominguez said the government targets to raise about P2 trillion from the comprehensive tax reform program to help fund the country’s massive P8-trillion infrastructure buildup, which is seen to improve people’s lives from all ranks. – Rappler.com
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