* This is my article in BusinessWorld on February 15, 2018.
Electricity and energy means development. So an increased
electricity supply at a lower, more stable, and more competitive price results
in increased development.
Increased development means more businesses and job
creation and less unemployment and poverty.
As a result, it is anti-development to impose new or
higher taxes that will make electricity prices more expensive.
The new tax law called Tax Reform for Acceleration and
Inclusiveness (TRAIN) did just that.
It imposed new taxes or raised existing taxes on oil
products, coal, and electricity transmission. But TRAIN played favoritism by
exempting from tax hikes natural gas and intermittent energy like wind and
solar.
The Philippines inflation rate jumped to 4% in January
2018 from 3.3% in November-December 2017. Other Asian countries experienced
flat or lower inflation last month. Why?
The most proximate explanation is the TRAIN law, even if
various pass-through costs have yet to take effect. For instance, the hikes in
coal tax, bunker fuel tax and VAT on transmission charge will be felt starting
February billing. The expected inflationary pressure especially for oil price
hikes contributed to this situation.
The table below is an attempt at quantifying the projected
electricity price hikes because of TRAIN.
These estimates are made on certain assumptions that are
based on available data. Changes in assumptions and more comprehensive,
national data will change the results, upward or downward but the numbers will
not be significant.
Based on these estimates, paying an extra 14 centavos/kWh
this year, 21 centavos/kWh in 2019, and 27 centavos/kWh in 2020 might appear
small for those consuming only 200 kWh/month. This consumption level implies
that a household doesn’t have any air-con but maintains a small refrigerator
and a few electric lights may have to pay an extra P28/month, P42/month and
P54/month in 2018, 2019, and 2020, respectively.
But that is only for direct household electricity
consumption. People who live in those small houses may work and/or purchase
services in factories, schools, and universities, shops and malls, hotels and
restaurants, hospitals and airports, etc. These enterprises consume tens of
thousands of kWh per month and the additional electricity cost will be passed
on the consumers, which might affect sales and hence, affect future salaries
and benefits of workers.
TRAIN 1 made a big mistake of raising the cost of energy
in the country. The only consolation is that the law did not impose the whole
oil tax hike of P6/liter in 2018 because it staggered the hikes in three years.
And the law did not follow the distortionary Habito coal tax proposal of
P600/ton, or even the Legarda proposal of P100, P200, P300/ton coal tax from
2018-2020.
TRAIN 2 tax bill should not entertain additional energy
tax hikes.
Expensive electricity is never a virtue as so many things
that we do now require electricity. TRAIN 2 should in fact cut more national
and energy taxes because the Duterte administration is serious in its
federalism agenda by allowing the states to create their own taxes and their
own new government agencies.
With these things in mind, I leave you with a reminder
from former US president Ronald Reagan: “The problem is not that the people are
taxed too little. The problem is that government spends too much.”
----------------
See also:
BWorld 178, Top 8 energy news of 2017, January 14, 2018
BWorld 181, Effects of Supreme Court TRO on RCOA, January 22, 2018
BWorld 185, Lower taxes via more mineral exports, February 06, 2018
BWorld 186, Land use bill and Asian urbanization, February 23, 2018
BWorld 187, Asians’ freedom from high inflation and regulations, February 24, 2018
No comments:
Post a Comment