TRAIN’s oil, sweet beverage levies to raise prices, worsen poverty

December 7, 2017

by IBON Foundation

The Duterte administration’s tax program, particularly the fuel excise and sugar-sweetened beverages (SSB) tax, will cause price hikes and aggravate Philippine poverty, research group IBON said. The Tax Reform for Acceleration and Inclusion (TRAIN) will most likely make the burden heavier for the 22 million officially extremely poor Filipinos and more than 60 million living on Php125 or less per day, said the group. According to IBON, government’s alleged concern over recent poverty estimates should translate to a genuinely progressive tax program.

IBON said that despite some Senate amendments of the House-approved version of TRAIN, the tax program’s generally anti-poor facets remain. For instance, new taxes on oil products and SSB have been maintained albeit revised from the House to the Senate versions. From these two sets of new taxes alone, price hikes on a wide range of ordinary consumer goods loom, said IBON.

The group noted that under the last publicly available Senate version of TRAIN, for the first year, lubricating oils and greases, waxes and petrolatum, naptha, regular gasoline, pyrolysis gasoline, and the like, and unleaded premium gasoline will be taxed with Php6.00 per liter. Processed gas, denatured alcohol, diesel fuel oil, asphalts, and bunker fuel oil will be levied Php1.75 per liter. Aviation turbo jet fuel meanwhile will be taxed with Php4.00 per liter, and liquefied petroleum gas, Php1.00 per liter. These levies are scheduled to increase in the succeeding years.

IBON stressed that new taxes on oil will increase prices as petroleum products are widely used, with transportation accounting for more than 80% of demand as per Department of Energy 2017 data. This will affect not only the cost of travel but the cost of trade as well, leading to more fare hikes, more expensive raw and manufactured food and goods, and even higher utility bills. Add to this, IBON said, the Senate’s inclusion of a Php100 per metric ton levy on coal, which will definitely contribute to steeper electricity rates starting 2018.

Meanwhile, a Php5.00-per liter tax shall be collected on SSB using purely caloric sweeteners; Php10.00 per liter on beverages sweetened with high fructose corn syrup; and Php3.00 per liter on beverages sweetened with pure non-caloric sweeteners, or a mix with caloric sweeteners. The Senate’s version of TRAIN exempts from this list commonly bought sweetened products such as milk, natural fruit and/or vegetable juices, meal replacements, coffee, and unsweetened tea. Still, according to IBON, consumers with very little nutritional choices will have to contend with more expensive soda, fruit drinks, sports drinks and sweetened water.

Additional indirect consumer taxes will only take more money away from the pockets of millions of Filipinos with very meager incomes. The spike in prices to be caused by the retention of new taxes on oil products and SSB and the additional amount to be taxed on coal will be a scourge to the poorest 60% of Filipino households whose incomes are way below the family living wage of Php1,130.

A tax policy that burdens the poor more could not be a solution to poverty, IBON said. What can possibly help address the country’s alarming poverty levels is a tax policy that collects more from the wealthiest few. Higher direct income taxes should be collected from the richest, and indirect consumer taxes that the poorest have to bear can be reduced, said the group.