MANILA – By raising the excise tax on fuel products, the Tax Reform for Acceleration and Inclusion (TRAIN) law sent “a very strong negative signal to the market” that meant that commodity prices would go up, an economist said recently.
Emmanuel Leyco, associate professor at the Asian Institute of Management’s Department of Finance, Accounting and Economics, noted in an interview on GMA News’ “Balitanghali” that this seems to be the emerging reality in light of the tax reform law.
“Sa palagay ko masasabi natin ngayon na ang TRAIN law created a very strong negative signal to the market. Ang ibig sabihin niyan, nung nagsabi sila na magkakaroon ng excise tax sa fuel … ang ibig sabihin niyan tataas ang presyo ng mga bilihin dahil lahat ng produksyon natin nangangailangan ng fuel, nangangailangan ito ng gasolina,” he said.
“It’s a very strong market signal,” Leyco emphasized.
The proposed TRAIN Act was signed into law by President Duterte in December 2017. It took effect on Jan. 1, 2018.
“Tumataas ang presyo ng gasolina sa world market. Hindi natin macocontrol ‘yan, but we can control the signals that we send in the domestic market by our domestic policy makers,” the professor noted.
Inflation accelerated to 5.7 percent in July, the fastest in at least five years.
It was nearly twice as fast as the 2.4 percent in July 2017, and faster than 5.2 percent in June 2018.
It was also the seventh straight month of accelerated inflation, since registering at 3.4 percent in January.
Critics of TRAIN have said that the law has a huge impact on inflation, which the Duterte administration has denied saying that tax reform has minimal impact on prices of goods and services.
The Department of Trade and Industry blamed higher fuel prices more than the TRAIN law, noting that even without tax reform, prices of goods would go up due to rising crude prices in the world market.
Reconsider economic strategy
The economy decelerated to 6.0 percent in the second quarter of 2018, from 6.7 percent a year earlier.
Leyco noted that economic circumstances have shown that the government must reconsider its economic strategy.
“Ang inflation, slowing down ng GDP growth rate, are very strong indicators already na we have to rethink our economic strategy,” the economist said.
The government needs to focus on improving the agriculture sector as well as industries which may contribute to economic growth.
“Right now, ang pinakamagandang strategy natin ay palakasin ang agrikultura at palakasin din natin ang mga industriya. Hindi po pwede na bibili tayo ng mga pangangailangan sa labas. Hindi pwede na ang ating industriya ay malilimita lamang sa pagaassemble,” he said.
“Hindi po pwede na malilimita lang tayo sa mga BPO, call center activities. Kailangan, in a globalized economy, the Philippines will have to offer competitive products,” Leyco added. (GMA News)
