New VAT Eats into
Consumers’ Already Scanty Budget
The first stage of the new Value-Added Tax
law – an expansion of its coverage – could not but bring about an increase
in the prices of socially sensitive food products. As this is being
written, the VAT rate is set to be increased to 12 percent from the
present 10 percent in a few days.
BY ALEXANDER MARTIN REMOLLINO
Bulatlat
A man waits for rushing buyers because
in the next
two days, prices of several products will increase from
its regular price.
PHOTO BY
TAMMY DE CASTRO |
With the
percentage of the Value-Added Tax (VAT) set to be increased this February
from 10 to 12 percent, the country’s consumers are now understandably at a
loss on figuring out how to stretch their dwindling budgets.
The increase
in the VAT rate from 10 percent to 12 percent was one of eight revenue
measures pushed by President Gloria Macapagal-Arroyo in 2004, when the
country was hit by a fiscal crisis. Congress instead passed last year the
restructured VAT (RVAT) law increasing VAT coverage to include oil, power,
and transportation. However, the new RVAT law also grants Macapagal-Arroyo
standby authority to increase the VAT rate from 10 percent to 12 percent
in February. The bill took effect on Nov. 1, 2005.
|
As things
were, most Filipino consumers were already having a hard time coping with
skyrocketing prices of goods and services before the coverage was
expanded. The expansion of VAT coverage caused a further reduction in
their budgets.
Already
covered before RVAT took effect were: food products (processed meat,
canned fish, coconut and vegetable oil, bakery products, noodles, milk,
dairy products, coffee, sugar); clothing, footwear, tannery and leather
products; drugs and medicine, furniture, pulp and paper; glass and glass
products; cement, steel, iron, wood and most construction materials;
electrical lamps and equipment; machinery and equipment both for
manufacturing and agriculture; wholesale trade and retail trade;
pawnshops; restaurants, cafes and other eating and drinking places;
employment and recruitment agencies; motion picture production; hotels and
motels; and telecommunications (including landline, post-paid and pre-paid
mobile phone services).
Bulatlat
did the rounds of a number of supermarkets and variety stores and noted
down the average prices of food products particularly known to be socially
sensitive. A comparison between prices before and after Nov. 1, 2005
revealed increases that give consumers just cause for worry.
|
Prices |
|
Before Nov. 1 |
Since Nov. 1 |
white sugar |
P35.00/kg ($0.67) |
P36.85/kg ($0.70) |
brown sugar |
29.00/kg ($0.55) |
30.00/kg ($0.57) |
washed sugar |
30.00/kg ($0.57) |
31.50/kg ($0.60) |
instant pancit canton |
5.00/pack ($0.09) |
5.85/pack ($0.11) |
instant noodles |
4.75/pack ($0.09) |
5.00/pack ($0.09) |
sardines |
9.75/can ($0.19) |
10.50/can ($0.20) |
eggs |
49.75/dozen ($0.95) |
52.75/dozen ($1.07) |
vinegar |
7.00/340-ml bottle ($0.13) |
7.55/340-ml bottle ($0.14) |
A few days
after RVAT took effect, Vice President Noli de Castro was photographed in
the newspapers and seen on television doing the rounds of public markets
and monitoring prices. Likewise the Department of Trade and Industry (DTI)
issued a number of statements saying the RVAT implementation did not have
to result in significant price increases, as it merely expanded the
coverage and did not yet raise the VAT rate.
But De
Castro and the DTI both missed the point. The first stage of the new VAT
law could not but bring about an increase in the prices of the food
products listed above.
Oil and
power are indispensable in the processing and packaging of goods.
Production costs are included in the prices of goods, as are
transportation costs. Since the VAT law in its first stage included oil,
power and transportation in the tax coverage, price increases as a result
of RVAT should come as no surprise.
As this is
being written, the VAT rate is set to be increased to 12 percent from the
present 10 percent in a few days.
Macapagal-Arroyo
aggressively promoted the RVAT as a revenue measure supposedly to stave
off the fiscal crisis that hit the country in 2004. The RVAT was the
centerpiece of the tax reform program of the Arroyo administration and its
most important revenue generating measure.
Those
opposed pointed out that instead of raising the tax burden of the people
the government could have reviewed the tax exemptions being provided large
corporations amounting to around P229.1 billion ($4.373 billion) in
potential revenues in 2003 alone according to Former Finance Secretary
Juanita Amatong; reduction of tariffs costing the government losses of up
to P100 billion ($1.9 billion) a year by Ibon Foundation estimates;
plugging tax leakages amounting to P215 billion ($4.1 billion) to P285
billion ($5.4 billion) in lost revenues; and cracking down on corruption
that siphons out 20 to 30 percent of the national budget based on a study
by the National Tax Research Center.
Meanwhile,
December 2005 data from the National Wages and Productivity Commission (NWPC)
show that the living wage for a family of six, the average Filipino
family, now stands at a national average of P619.20. In contrast, the
daily minimum wage is currently pegged at a national average of only
P222.29.
The
Macapagal-Arroyo government has been snubbing calls for wage increases
while prices of prime commodities continuously jack up. And now, with the
impending increase in VAT rates, another wave of price increases is in the
offing. That would further widen the gap between the family living wage
and the daily minimum wage. Bulatlat
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