Cost of TRAIN: Will softdrink, fuel taxes offset higher take-home pay?

Jessica Fenol and Arthur Fuentes, ABS-CBN News

Posted at Jan 04 2018 10:01 AM

People with motorcycles fill up with gasoline in Manila, June 5, 2017. Jonathan Cellona, ABS-CBN News

MANILA - A grocer turned off "bottomless" softdrinks and transport groups announced plans to seek a fare increase on the first business day of 2018, as the first package of tax reforms took effect.

The government raised taxes on fuel, sugar-sweetened drinks and cars to offset a reduction in personal income taxes that would mean higher disposable income or take-home pay for salaried workers.

Up to 99 percent of households will benefit from tax reform since the government also programmed cash subsidies for the poor aside from lower tax rates, according to the Department of Finance.

Kurt De Peralta, a 41-year-year old financial data analyst for an outsourcing firm, said he expected a P7,000 bump in his take-home pay. But he will need to cope with an increase in gasoline prices.

A P2.50 excise tax will be charged per liter of diesel while the duty on gasoline will be raised to P7 from the current P2.35 this year. The Department of Energy said new taxes should reflect on pump prices by Jan. 16, when old inventory would have been used up.

De Peralta consumes roughly 10.5 liters of gasoline per week, and the P2.50 per liter increase in excise tax could mean an additional P26.25 per week or P105 per month.

Oil firms have not announced by how much they will increase pump prices.

De Peralta's could also be paying more if he keeps his softdrinks habit.

Beverages with caloric and non-caloric sweeteners will be taxed P6 per liter while those using high-fructose corn syrup, a cheap sugar substitute, will be charged P12 per liter.

This would mean an additional P48 per month for De Peralta, who consumes half a dozen 330 milliliter cans of soft drinks per week, equivalent to 2 liters.

De Peralta also smokes up to 2 packs of cigarettes a day. With the excise tax hike of P2.50 per pack, he will be spending an extra P140 per month to get his nicotine fix. 

Based on the new schedule for "sin" taxes, the duty on tobacco products will be raised to P32.50 per pack from Jan. 1 to June 30, 2018 and further to P35 from July 1 next year to Dec. 31, 2019. 

Under a 2012 law that restructured levies on tobacco products and spirits, the P30 tax per pack will be be increased annually by 4 percent from Jan. 1, 2018.

Additional consumption taxes were likely to shave roughly P300 from De Peralta's additional P7,000 take-home pay. But he said he was worried for the poor, who were already exempt from tax under the old system.
 
“I pity the poor as this would mean more hardship for them,” he told ABS-CBN News.

Small businesses and community stores selling softdrinks and energy drinks earlier said they would increase prices by around P2 per 300 ml bottle.

"Ang pinakamabili kasi ay yung mga softdrinks so talagang affected yung mga tindahan namin. Kapag mataas siya, sigurado 'yung sales namin bigla din bababa kung bigla naming itataas," said Francis Salud, a sari-sari store owner.

(Softdrinks are big sellers so our stores will be affected. If prices are high, our sales might go down.)

According to the Philippine Statistics Authority, the annual income of an average Filipino family in 2015 was P267,000 or around P22,000 per month.

Before the TRAIN law, people who earned P267,000 a year had to pay P38,131 in taxes. Under the new tax law, they only need to pay P504.

But since the old tax laws also provided exemptions for being head of the family and having up to 4 dependents, married couples with children who were in this income tax bracket did not really have to pay any income taxes. 

The Makabayan bloc in the House of Representatives said it would question the new taxes before the Supreme Court.

"Mayroon ngang binigay na mga benepisyo sa kaliwang kamay, pero talagang nawawala rin dahil kinakain ng pagtaas ng mga presyo at pag-impose ng bagong taxes," Bayan Muna party list Rep. Carlos Isagani Zarate told DZMM.

(There may be some benefits from the left hand, but this will be eaten up by higher prices and new taxes.)

Finance undersecretary Karl Kendrick Chua had said that tax reform was an investment on the future since the government's infrastructure program would spur business on the countryside and lift millions from poverty.

"Without tax reform the poor will likely remain poor," Chua told ABS-CBN News last year before the law was passed. "We don't want business as usual. We want to grow and become prosperous."

"We now have the capacity to think very long term. The policies now are about long term development," said Chua, a former World Bank economist.

-- with reports from Katrina Domingo and Vivienne Gulla, ABS-CBN News