Consumers are starting to feel the initial shock of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Hundreds of gas stations started raising fuel prices despite warnings from the Department of Energy to fuel retailers not to charge the new excise tax until their old stocks have been consumed. Several news reports even showed video footage of several gas station already charging higher prices.
Some oil companies have announced an increase of 55 centavos for diesel and 80 centavos for gasoline due to the rising cost of imported fuel. Adding excise taxes, gas prices will increase by P3.77 and P3.35 for diesel.
As directed by the TRAIN law, a P7-per liter excise tax on gas will be charged this year, an increase by P2.65, which goes up to P9 per liter next year and P10 per liter by 2020. As for the fuel of the masses, diesel is now slapped with a P2.50-per-liter excise tax rising to P4.50 in 2019 and P6 by 2020.
Anticipating the direct effect on public transportation, the Land Transportation Franchising and Regulatory Board likewise warned drivers and operators of public utility vehicles not to implement any unapproved fare hikes or face fines and even cancellation of their franchise. Despite the warning, some UV express drivers have been reported to have started distributing flyers to passengers advising of a fare increase blaming the increase in fuel cost and basic commodities. Jeepney groups also have filed petitions for a P2 fare increase.
Bangko Sentral ng Pilipinas officials have confidently said that the new taxes from TRAIN would add less than one percent to inflation keeping price increases at manageable levels. However, BSP Governor Nestor Espenilla was quoted last week saying that the central bank “may need to react” because of second-round effects of the TRAIN law which some economists see to push up to the 2-percent-to-4-percent range resulting from increasing transportation costs and pressure for higher wages.
To remind the public of the “game changing” benefits of TRAIN, the National Economic and Development Authority announced that the government will start breaking ground on 34 out of the 75 mega-infrastructure projects under the “Build, Build, Build” program. The big-ticket projects highlighted to be started this year are 12 bridges that will provide new traffic routes across the Manggahan Floodway, Marikina and Pasig rivers. Several multi-billion-peso infrastructure projects such as the Philippine National Railway North 2 Project, the PNR North 1 from Bulacan to Clark and the PNR South Long-Haul Project linking Manila to Legazpi.
Latest estimates from Neda on the total cost of 66 of these projects are already at a whopping P2.289 trillion.
Not doubting the high competence of the government’s economic team, reassuring and even exciting statements might prove to be empty lip service to tens of millions of consumers. The bannered gains from TRAIN might be negated if the burden becomes too much for ordinary Filipino consumer.
After imposing all these new taxes, the government must prove to the Filipino people that the hundreds of billions in new revenues from TRAIN will not be squandered in the massive gaps in our front-line revenue collection agencies, the Bureau of Customs and Bureau of Internal Revenue.
A recent multi-industry study by the University of Asia and the Pacific shows that in just five years, illicit traders were able to smuggle at least P904.6 billion worth of contraband into the country. This shocking figure only covers eight industries with frequently smuggled products like petroleum, steel, resins, wood, cigarettes, sugar, palm oil, and automotive batteries. Actual numbers would perhaps approach above the trillion-peso mark.
We all know that there are chronically massive gaps in the way that the Bureau of Customs is policing our ports, resulting in massive revenue losses for the government. Some estimate that illicit trade had an impact of no less than P495.5 billion on the country’s gross domestic product from 2011 to 2015. Add to that, more than a trillion-peso loss in domestic production or gross output and some 291,070 displaced workers, all due to smuggling.
The BIR’s performance, though improved, did not make its P1.8-trillion target in 2017. Being the lead implementer of TRAIN, the government should must prioritize on instituting what might be said to be out-of-the-box and uncompromising reforms in tax administration.
Just a month after the TRAIN law was passed into law, the Department of Finance already submitted the draft for tranche 2 of the TRAIN to the House of Representatives. Though it’s supposed to be revenue neutral, the precedent of surprise taxes in TRAIN 1 sends warning alarms of another wave of new taxes being inserted without the benefit of stakeholder consultations.
As the inflationary effects of TRAIN start burning into the thin wallets of the masses, proposing new taxes will be an unnecessary risk for the Duterte administration. We don’t need more taxes, we need real results in efficient tax administration and in making good the President’s promise to kill corruption in government.