Consumers to start feeling pinch of inflation

WHILE businesses are expected to sustain their growth despite the rising inflation rate, a local economist is pointing out that the most affected with this are the consumers especially the poor consumers.

With higher prices of consumer goods, it follows that the purchasing power of consumers is reduced.

“Business growth is expected to be sustained but local consumers will start to feel the pinch,” said Steven Yu, Mandaue Chamber of Commerce and Industry’s vice president for external affairs in a phone interview on Tuesday.

Cebu-based economist Fernando “Perry” Fajardo also pointed out in a separate interview that while consumer prices continued to increase, the income of most families had remained the same.

“You cannot protect against inflation if your income remains the same. Your only recourse is to decrease consumption expenditures which is hard to do if you are poor,” Fajardo said.

Among the causes of inflation given by Fajardo is the Tax Reform for Acceleration and Inclusion (TRAIN) law which was implemented last January.

A vocal critic of the TRAIN law, Fajardo pointed out that while the law increased the minimum amount of exempted personal income tax to P250,000, the bottom 40 percent of Filipino families (based on income) had already been exempted from the tax even before the law.

He said this meant that these families had actually no realized savings in income after TRAIN.

However, the TRAIN had increased and imposed new excise taxes on some products that included oil and petroleum products.

What benefits?

Cebu Business Club (CBC) President Gordon Alan Joseph also said that government had yet to report the benefits of the TRAIN law.

“I think it’s too early for a knee jerk reaction, but the government is duty bound to communicate to the public the real issues, including the benefits, whether or not Train had actually increased government revenues (and if not why not) and the potential problems continuing high inflation will produce,” Joseph said.

Personally, he said, he had not seen any benefit to businesses or even to sectors whose take home pays had increased with the removal of personal income tax since the price increases of consumer products had negated this.

“Having said this, it is time for a dialogue between business and government to identify the problems and potential solutions, which I believe will include reducing excise taxes on key commodities like fuel and food,” he said.

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