Tag Archives: Tax Reform for Acceleration and Inclusion (TRAIN)

The Bitter Truth About Sugar Tax!

“Tax on sugar sweetened beverages is both anti-worker and anti-poor. It is also the wrong solution to our health problems,” declared Alfredo Marañon, national president of the Federation and Cooperation of Cola, Beverage and Allied Industries (FCCU), during a picket in front of the Senate this morning. “Worst, it could do more harm than good to our overall economy,” he added.

Rather than impose excise taxes that could leave workers jobless, the FCCU said that it could be more effective for government to invest on long-term solutions such as education campaign and regulating advertising on sugar-sweetened beverages.

Citing a study carried out by the the University of Asia and the Pacific (UAP) in 2016, the FCCU warned that, if passed, the supposed gains of TRAIN could be offset by its negative impact. According to the UAP, the economic impact of the proposed P10 per liter tax on SSB revealed that it will lead to a PHP 63 billion economy-wide loss due to reduced government revenues, job losses and economic contraction.

It should be noted that the DOF expects to collect PHP 47 billion from excise taxes in SSB.

Tax on sugar sweetened beverages is patently anti-poor,” Marañon said. According to a survey conducted by the DOF itself, the implementation of House Bill 5636 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act could push the prices of sugar-sweetened beverages by two percent to as much as 140 percent.

“While the poor will have to pay an extra PHP 3 for every powdered drink sachet they take, the rich can continue to have their tax-free sugar fix in their expensive coffee shops,” he added.

Tax on sugar sweetened beverages is patently anti-worker,” Marañon reiterated. In its study, the UAP projects that at least 133,750 direct and indirect jobs will be affected. This would include sugar workers, coffee farmers and workers in the beverage manufacturing.

In a workers’ dialogue with the DOF held in Davao City yesterday, 2 major beverage companies announced that they may be forced to layoff thousands of workers. One company said it may have to shut down 9 plants. Another company announced it may have to impose a moratorium on their collective bargaining agreement.

The figure cited by the UAP study could be a low estimate. The Beverage Industry Association of the Philippines (BIAP) claims that “over 1.3 million micro-entrepreneurs operating carinderias and sari-sari stores all over the country” will also be affected. It is said that 40% of revenues of carinderias are derived from beverage sales.

“There are better ways to address the country’s health concerns,” Marañon said. Studies abroad shows that investing on massive public education campaign, regulating advertising on sugar-sweetened beverages, and even implementing simple solutions that could “nudge” consumers to reduce consumption – like promoting use of smaller containers – could be far more effective solutions than what President Duterte’s TRAIN wants.

The FCCU is a nation union of workers in the beverage industry. It is affiliated to the Sentro ng mga Nagkakaisa at Progresibong Manggagawa (SENTRO) and the International Union of Food Workers (IUF).

Duterte’s TRAIN will Collide with Workers’ Livelihood

Workers belonging to the Sentro ng mga Nagkakaisa at Progresibong Manggagawa (SENTRO) and the Philippine Airlines Employees Association (PALEA) today picketed the Senate to express their opposition to the Tax Reform for Acceleration and Exclusion or TRAIN.

The labor groups, both members of NAGKAISA Labor Coalition, believe that tax reform is long overdue. For years, workers have been demanding a shift from taxing consumption (a regressive tax system) to one that is based on income (progressive taxation). Unfortunately, Duterte’s TRAIN, as it is currently crafted, is taking the wrong way.

“We welcome lower tax on personal income but reject the regressive impact of excise taxes,” Gerry Rivera, president of PALEA said. “With TRAIN, the government intends to ease our tax burden by forgoing P140 billion in personal income tax, only to collect from us P190 billion through VAT-based expansion and excise taxes!,” Rivera added.

This morning, the Senate is holding a public hearing on TRAIN, specifically on the excise taxes it will impose on petroleum products. The Department of Finance (DOF) proposed to earmark 40% of the PHP 73.7 billion incremental revenues from the oil excise tax (for 2018 alone) to fund targeted transfers through Pantawid Pasada program and the Jeepney Modernization Plan.

The Jeepney Modernization program of the Department of Transportation (DOTr) will phase out PUJs that are older than 15 years. The program will forcibly replace 205,000 of the 234,000 registered jeepneys that are currently in use in the country. Initially, the DOTR wanted to extend new franchises only to big operators who able to deploy at least 10 jeepneys. “Had we not launched transport strikes against this policy, the DOTr would have displaced at least 410,000 drivers and small operators by now,” Cruz said.

“The tragic thing is, government wants to take away our livelihood from us by phasing out our jeepneys,” Ernie Cruz, national president of the National Confederation of Transportworkers Unions (NCTU), bemoaned. “Now it is saying that it would tax us to death in order to modernize our jeepneys,” Cruz added.

“The problem is, the government has yet to demonstrate that their Jeepney Modernization Plan is accessible to ordinary jeepney drivers and operators,” Cruz complained. “The DOF, through the TRAIN, in its current form, may just succeed where the DOTr failed – deprive us of our livelihood,” Cruz declared.

The labor groups support NAGKAISA’s position to prioritize tax administration reform and de-link personal income tax from regressive tax measures.

“We call on the Senate to pass the personal income tax (PIT), but derail the rest of the TRAIN for now,” Rivera declared.

On Tax Reform for Acceleration and Inclusion (TRAIN) Package 1

NTRC graph image

Labor coalition welcomes lower tax on personal income but rejects regressive impact of excise taxes.

Workers have long been demanding for higher tax exemptions, hence, the approval by the House of Representatives of Package 1 of the Tax Reform for Acceleration and Inclusion (TRAIN) is a welcome relief.

Under the TRAIN, income lower than P250,000 per year will be tax free while higher income brackets, except for those who earn more than P5 million, will be charged a lowered tax rate of 25% from the current high of 32%.

This is surely a welcome development. But for the labor coalition Nagkaisa, the workers’ gain in Personal Income Tax (PIT) will be offset in a regressive manner by the imposition of excise taxes on fuel products and the lifting of VAT exemptions in the sale of specific goods and services.

“Everyone knows, not just workers, that it will increase prices of goods and services that would affect mostly the poor and those at the lower income brackets,” said Nagkaisa spokesman Renato Magtubo.

Magtubo said the TRAIN’s objective of shifting the tax burden from the poor to the rich, “Seems to be scheming if not tricky as forgone revenue on the side of the government, which is equivalent to individual savings derived from lower PIT of specific income group, shall be recovered in a universal manner through excise taxes and expanded VAT.”

The group explained further that the tax base can never be expanded through exemptions in PIT and corporate income, making indirect taxation through excise taxes and VAT expansion the main strategy in generating new and more revenue. “Otherwise, nobody is going to pay for the lost revenue,” added Magtubo.

Under TRAIN’s package 1, a P3.00-P6.00 excise taxes will be imposed per liter on fuel and P10 for locally produced sugary products while several VAT-exempt products and services will be lifted, including cooperative income exceeding the P3 million thresholds. Likewise, sale of real estate for socialized housing will now be covered by VAT.

According to the group, even the simulations made by staffs of the finance department showed the inevitable impact of increase in VAT payments by decile group – 43% for the richest 10% and 35% for the bottom 80%. Increase for the second richest 10% is 22%.

“An increase of 43 and 22 per cent respectively may mean nothing for the richest 20% who got significant savings from PIT exemptions. But a 35% increase is surely a burden for the bottom 80% who includes the majority in the formal and informal sector, employed and unemployed, of the working class. In the same manner everyone will be paying for the direct and indirect impact of excise taxes on fuel,” explained Magtubo.

The labor leader added that those living in SPUG areas which rely on diesel as their single source of power will be absorbing a “minimal” impact, according to DOF. But that would mean additional P84 for those who consume 100 kWh per month and P106 for those who consume 300 kWh.

“These are the immediate impact that will hit everyone while the poor wait for the promised transfers contained in the proposed expenditure programs of the government,” said Magtubo.

The group said it will intervene in the continuing deliberation of the tax package in Congress especially on the proposed lowering of income taxes for corporations from 30% to 25%.

“Our main question for this is why a tax rate on corporate income, which is supposed to be a tax on profit, is being lowered down to the same level of personal income which is a tax on labor? A uniform rate on business and personal income can never be considered progressive taxation,” concludes Magtubo.”

PRESS RELEASE
NAGKAISA
13 June 2017