Bizmen coping, feeling pinch of inflation, fuel price hikes

Apart from consumers and transport groups, businesses are also feeling the pinch from the continued increase in prices of oil products.

Just yesterday, oil companies in the country have implemented a P0.65 per liter increase on the prices of gasoline, diesel, and kerosene, bringing the total increases this year to over P10 per liter.

Retailers in Cebu have pointed out that increases in oil prices have a direct impact on them especially on the logistics side.

“Our gas prices have been increasing tremendously and are very, very expensive already,” said Robert Go, president of the Philippine Retailers Association (PRA) Cebu Chapter.

“At this rate of increase, this is inflationary and affects everything from food to every consumer good. Logistics increase and so are (the) prices,” he added.

Companies like Petron, Shell, Seaoil and Flying V have increased the prices of their gas, diesel, and kerosene by P0.65 per liter each starting 6 a.m. yesterday.

On the other hand, PTT Philippines has increased only their gas and diesel prices by P0.65 per liter.

Based on records, since January this year, the price of gasoline has gone up by more than P12 per liter. On the other hand, diesel has already increased by around P14 to P16 per liter while kerosene increased between P12 to P18 per liter.

Excise taxes

Go pointed out that these increases have been worsened by the additional excise taxes imposed on oil products starting last January 1 under the Tax Reform for Acceleration and Inclusion (Train) law.

Under the law, excise tax on regular unleaded and premium gas was increased by P7 per liter this year. It will be further increased to P9 per liter in 2019, and P10 per liter in 2020.

Meanwhile, diesel and bunker fuel are taxed P2.50 per liter this year, P4.50 per liter next year, and P6 per liter in 2020; while petroleum gas increased by P1 every year from this year to 2020.

“This (oil price hikes) is exacerbated by excise tax which at this point should be suspended until world prices (of oil) would lower back to normal,” Go said.

This is also the observation of the Employers Confederation of the Philippines (Ecop) in an Inquirer.net report as they made a call to government to suspend implementing excise taxes to curb inflation.

ECOP’s appeal

In a statement, the Employers Confederation of the Philippines (Ecop) said the government should keep from further implementing fuel tax hikes under the Train law, the first tax reform package of the Duterte administration.

While the package lowered the personal income tax of millions of Filipinos, it increased consumption taxes such as on fuel, which have partly contributed to the spike in prices of basic goods and services.

“While oil price movements in the international market are beyond the control of our policy makers, there are a number of actions that can be immediately put in place to curb inflation and help not only employers but most specially the less fortunate where the brunt of higher prices are felt the most,” Ecop said.

“While it would be difficult and unproductive to reverse TRAIN 1 and delay the implementation of TRAIN 2, the government can consider suspending any further automatic increases in taxes on petroleum products in the coming years, as originally proposed,” the group added.

Interest rates, labor

This is the first time that the group made such an appeal, as it cited ways the country might react — both good and bad — to address inflation, which reached a 9-year high in August.

Ecop said the central bank might be increasing interest rates soon, which will “only escalate borrowing costs further.”

Moreover, the labor sector might file for a petition to increase the minimum wage, “which business could hardly afford at this time where costs pressures weigh heavily on its operations and eventual viability. “

“Given all these and the seeming endless distractions and noises from the political front, there is really a basis for concern among employers and investors alike,” the group said.

The country’s inflation hit an over nine-year high of 6.4% in August.

On the increase of prices of the oil products, the Department of Energy (DOE) cited data from the International Energy Agency (IEA) which showed several factors affecting the increases including the geo-political situations across the world including Iran sanctions and the drop in Venezuela production.

How they coped

While Go’s suggestion to suspend the excise taxes on oil products is valid, the Train law provides for a specific mechanism on when it can only be implemented.

Under Section 5 of the Train law, the increase on excise tax on fuel can be suspended only when the average price of Dubai crude oil based on the Mean of Platts Singapore (MOPS) for three months prior to the scheduled increase of the month reaches or exceeds US$80 per barrel.

In the meantime, Go said business will have to absorb the increase in their overhead cost due to the higher prices of fuel.

“We cannot increase too much if consumers cannot cope. Business has to absorb the cost but up to where? We have to go back to the drawing boards. But if manufacturers increase our cost, we have no choice but to follow the increases,” he said.

For their part, the Mandaue Chamber of Commerce and Industry (MCCI) agrees on the need for businesses to temporarily absorb the increased expenses.

MCCI Vice President for External Affairs Steven Yu said though that any government assistance and interventions, even if not directly on fuel prices, can help lessen the burden on businesses which are the biggest generator of employment in the country.

“Businesses are tightening their belts, and looking for ways to increase productivity and sales production to cover up for the increased overhead,” Yu said.

“These are external factors and we can only hope that international crude prices will correct and normalize soon,” he added. /With Inquirer.net report