"Not at the expense of the poor!"
"Not at the expense of the poor!"
Two weeks ago, as I thought of the then-impending enforcement of the third phase of TRAIN (Tax Reform and Inclusion Act) 2, a word associated with criminal law came to my mind. The word was recidivist. In criminal law a recidivist is a person who commits an offense for which he has previously been prosecuted and convicted.
As my mention of TRAIN 2 suggests, the recidivist that I was thinking of was an institution, not an individual. The institution is the governmental entity charged with enforcing that piece of fiscal legislation, namely, DOF (Department of Finance).
In 2017-2018 this country experienced its worst bout with inflation in five years. At its peak, in July 2018, the inflation rate, as measured by the consumer price index (CPI), rose to 5.7 percent, bringing 2018’s average monthly inflation rate to 2.5 percent.
The mismanagement of the national rice supply by NFA (National Food Authority) has been held accountable for the sharp rise in rice prices—to as high as around P42 per kilo—by most observers, but the weight of expert opinion is on the increases in petroleum-products prices as the principle cause of that inflation. In response to the strong clamor from consumer and labor groups for speedy and effective action to contain the inflation, members of Congress moved for the suspension of the increases in the excise taxes on petroleum products (diesel, bunker fuel, lubricating oil, liquefied petroleum gas, kerosene and gasoline). DOF heeded the clamor and suspended the collection of the increases.
Predicting the impact of the petroleum-products excise tax increases on the CA was a no-brainer. Petroleum products are key inputs unto three major sectors of the economy—manufacturing, power and transportation—and the movements of their prices have substantial effects on the cost of living of Filipinos on the lower reaches of the income scale. The prices of food items, electricity and transportation fares are highly responsive to upward changes in the prices of petroleum products. A recent report of the PIDS (Philippine Institute of Development Studies), a government institution, indicated that the national poverty ratio significantly rose in the wake of the 2017-2018 inflation.
Back to the concept of recidivism. Why did I think of recidivism when the third round of petroleum-products excise tax increases kicked in on Jan. 1? Because the latest round of increases in excise taxes on petroleum products is bound to give rise to another surge in consumer prices, there having been no major changes in the Philippine economy’s cost structure.
If the context were criminal law, that would make the DOF a recidivist: It committed and was penalized for an offense in the past and it is knowingly committing that offense again.
The law abhors a recidivist; so does the Philippine economy. DOF has embarked on the road to recidivism, but it can still avoid being a recidivist. This it can do by amending the petroleum-products excise tax by suspending or outright eliminating those that are most inflationary in impact and retaining those that are less so. The increase in the excise tax on gasoline can be retained; the other increases should be let go.
An increase in government revenue from excise taxes must not be obtained at the expense of a rise in this country’s poverty rate. Inflation makes poor people poorer.