BWorld 217, Dutertenomics, TRAIN and high inflation

* This is my article in BusinessWorld, May 30, 2018.

“There is no art which one government sooner learns of another than that of draining money from the pockets of the people.”

— Adam Smith, The Wealth Of Nations (1776), Book V, Chapter II, Appendix to Articles I & II.

Two columns in BusinessWorld on May 28 jointly defended Dutertenomics’ Tax Reform for Acceleration and Inclusion (TRAIN). These are “Eight former Finance secretaries support TRAIN 2” by Romy Bernardo of FEF and “Coolly explaining inflation” by Men Sta. Ana of AER.

I will quote some phrases from the two pieces and explain the title of this piece.

(1) “TRAIN has been unfairly blamed for the elevated inflation rate we are currently experiencing. By our estimates, fully two thirds of last April’s 4.5% inflation rate is typical of a rapidly expanding economy. The remaining is due mainly to the sharp increases in key imported commodities specifically oil, the realignment of currency exchange rates and a robust increase in domestic demand.” (Bernardo)

(2) “The higher inflation rate we are seeing is mainly a result of the increase in global crude oil prices. The Dubai crude oil price has increased to $68.43 per barrel in April 2018… The tax reforms resulting in higher fuel tax and higher prices of cigarettes and sugary drinks of course have contributed to inflation. But its effect accounts only for 0.4 percentage point of an inflation rate of 4.5%.” (Sta. Ana)

So the main explanation of Dutertenomics and its supporters as to why the Philippines has recently posted an outlier inflation rate are (a) high world oil prices, high sin taxes, (b) rapidly expanding economy, but the impact of (a) is very small while (b) is substantial.

If this is true, then other countries that bore the brunt of high oil prices and incurred elevated growth levels should also have rising inflation rates.

But this is NOT true and did not happen as shown in a chart covering Asian emerging and developed economies and the two biggest economies of America and Europe.

On (a), many countries even experienced lower inflation in January-April 2018 compared to December 2017 level despite the rise in world oil prices — UK, Germany, Malaysia, Pakistan, India, Indonesia, South Korea, and Singapore. Others have inflation differential of only 0.2% to 0.6% while the Philippines’ differential was 1.2% or 1.3% depending on the CPI base year used.

On (b), several countries that have reported growth momentums from 2016-2017 and were projected to grow at least 5.3% in 2018 experienced negative or low inflation differentials compared to December 2017 levels — Malaysia, Pakistan, India, Indonesia, Vietnam, China. These countries show that low inflation and fast growth can occur at the same time, no trade off expected (see table).

So are supporters of the TRAIN being less honest?

Moreover, their clamor for higher oil/LPG/coal taxes is directly proportional to their silence in calling for fare hike adjustments. They know 100% that higher oil prices will result in demand for higher fares/tariff by jeepneys, taxi, buses, UV express, trucks, etc.

And since January 2019 is fast approaching, another round of oil/lpg/coal tax hikes will come, prompting another round of demands for hikes in fares, electricity, and wages.

With this in mind, TRAIN supporters should be equally vocal in telling the LTFRB and DoTr to grant the fare hikes very soon, before the second round of energy tax hikes begin, then re-run their numbers on inflation impact and targets.

But there is sound of silence in this aspect.

If government will not grant the necessary fare hikes soon, PUV operators will cut costs elsewhere, like forcing bus drivers and mechanics to work longer hours at little or no extra pay, or using less-reliable but cheaper spare parts, or using old tires. Then we wait for more road accidents and government will blame the PUV operators then penalize them with huge fines or franchise cancellations.

(3) “We also believe that the corporate income tax (CIT) regime, burdened by the highest standard rate among ASEAN countries, at 30%, is in urgent need of reform. We strongly support the reduction of corporate income tax alongside the rationalization of tax incentives.” (Bernardo)

True, there is an urgent need for the Philippines to cut the CIT because our 30% is the highest in East Asia: Indonesia, China and South Korea 25%, Taiwan, Thailand and Vietnam 20%, Hong Kong and Singapore 16.5-17%.

But TRAIN 2 wants to cut the CIT to only 25% by 2022 or end of Duterte’s term while it will reduce or remove many fiscal incentives by 2019 if they succeed in having TRAIN 2 law this year.

So Dutertenomics is being less honest again on the extent of the Philippines’ taxation distortion.

Aside from the Philippines having the (1) highest CIT of 30% in East Asia, it also has the (2) highest withholding tax on dividends OF 15/30%, (3) highest withholding tax on interest of 20%, (4) highest withholding tax on royalties of 30%, (5) highest VAT/GST of 12%.

One big result of this is that the Philippines has the lowest FDI inward stock (inflows less outflows through the years) of only $64B in 2016 vs. $115B of Vietnam, $122B of Malaysia, $186B of S. Korea and Japan, $189B of Thailand, $235B of Indonesia, $1,096B of Singapore, $1,354B of China and $1,590B of Hong Kong.

A more economically realistic and politically acceptable CIT under TRAIN 2 would be 15%, or max 20% in exchange for reduction/abolition of many fiscal incentives. And such cut should be done in 2019 assuming that TRAIN 2 becomes a law in 2018, and not 2022.

Finally, the last point is that the implicit purpose of TRAIN’s tax-tax-tax strategy is to pay for loans-loans-loans from China and its crony contractors involved in Build-Build-Build as many previously integrated PPP were reversed to become hybrid PPP.

Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of Economic Freedom Network (EFN) Asia.

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See also:

BWorld 213, Disruption, inflation and taxation, May 23, 2018

BWorld 214, Disruption in global economic power, May 24, 2018 

BWorld 215, Urban mobility index and transport disruption, May 29, 2018 

BWorld 216, Positive and negative disruptions in the electricity market, May 31, 2018

Economic central planners meet ecological central planners

When economic central planners were hoodwinked by, or partner with ecological central planners, one result is lousy economic policy based on crystal-ball predictions. Like this high oil, LPG, coal taxes under TRAIN 1. Dutertenomists believed that world oil prices would never rise high anymore partly because they thought that world demand for oil will flatline or decline soon as more e-cars, e-bikes, e-buses come in. Of course the major reason is they want more transfer of money from private/household pockets to government pockets while they help "save the planet."

Here is an example, economic central planners thought that ecological central planners like UN-Al Gore-CCC, etc would be so right in predicting declining world oil demand and hence, low/stable world oil prices.

Pernia: Gov't did not expect crude price to reach multi-year highs

ABS-CBN News, May 19 2018 12:51 AM

http://news.abs-cbn.com/video/business/05/19/18/pernia-govt-did-not-expect-crude-price-to-reach-multi-year-highs

I talked to one DOF Junior staff and that's what he told me, DOF and the rest of Dutertenomics were thinking that supply-demand of gas engine cars will decline as demand for electric cars will rise fast. Eh 1980s ko pa narinig yang e-cars e-cars na yan, after 3-4 decades mostly press release lang and far out from being a really useful stuff. The reality is the opposite of what the ecological central planners say -- demand for oil-propelled vehicles, planes, boats, will keep rising.

Dutertenomists (DOF, DBM, NEDA, DTI, BSP) were so certain then when TRAIN was still a bill, that the inflationary impact of higher oil prices due to high oil taxes would be only 0.7% max. As of April 2018, ytd jump in inflation was 1.2% or nearly double their projected rates. So NEDA issued another prediction last May 04 that look like based on crystal-ball de manghuhula again.

UPTICK IN INFLATION TEMPORARY – NEDA

May 4, 2018

http://www.neda.gov.ph/2018/05/04/uptick-in-inflation-temporary-neda/

I said "crystal-ball prediction" by NEDA of inflation tapering off because govt, via LTFRB and Malacanang, with implicit silence of all Dutertenomists, will not grant any fare hike adjustments. Govt is good in sucking taxes from owners and operators of jeepneys, taxi, UV express, buses but will never grant fare adjustments.

If the Dutertenomists are responsible and honest, they should voice out granting the fare hike adjustments now and find other means to minimize the impact. Wala eh, pasimple lang.

Then January 2019 is near, round 2 of tax hikes for oil and coal, also LPG I think. Inflationary pressure will build up as early as December or Nov. 2018. Then tatahimik naman mga Dutertenomists for any fare hikes?

To say that PH inflation rate is high because of high world oil prices is dishonesty. If that statement is correct, then many if not all oil-importing countries in the world should have experienced high inflation in 2018 compared to December 2017 or full year 2017. This is NOT the case. Many countries even experienced deep decline in domestic prices despite the rise in world oil prices. See table 2 here,

Disruption, inflation, and taxation

May 16, 2018 | 9:22 pm

http://bworldonline.com/disruption-inflation-and-taxation/

"Inflation, as we have predicted, will be higher in May, June and July but will eventually go down but still at a high level. It will average close to BSP target band, so that should not lead to suspension," Ang said.

He also cautioned against efforts to suspend the implementation of the tax reform law, saying this would affect the country’s credibility as a now investment grade nation. "TRAIN Law cannot be reversed because the cost to economy and credibility is larger," he said, adding that TRAIN is a package for economic growth. "If you suspend it, where will you get the revenues to fund growth and what will investors and ratings agency think."

Suspension of TRAIN may affect Philippines credit rating — economist

Czeriza Valencia - May 21, 2018 - 12:00am

https://www.philstar.com/business/2018/05/21/1817046/suspension-train-may-affect-philippines-credit-rating-economist

I agree with Alvin there, I do not support the suspension of TRAIN 1. What I support is that many ugly and inflationary provisions of TRAIN 1 like high energy taxes (oil, LPG, coal), sugar tax, should be reversed and removed via TRAIN 2.

Du30 needs more TRAIN money so that the huge and many China loans that his administration will contract will be paid someday. I doubt if any of the Dutertenomists will admit the hidden agenda of build-build-build via loans-loans-loans from the China communist government.

"Government may have been too busy or too excited to collect the revenues from TRAIN that it forgot how important it is to prepare for its implementation. How a tax is implemented is equally important, if not more important, than the tax policy itself. Bad administration means bad policies. All the excel formula on the results of the TRAIN on prices and income distribution will come to naught when producers and taxpayers are left on their own to adjust to changes in tax rules." 

-- Nini Guevarra, former DOF USec.

How not to do a tax reform

Published May 15, 2018, 10:00 PM  By Milwida M. Guevara

https://business.mb.com.ph/2018/05/15/how-not-to-do-a-tax-reform/

Meanwhile, Du30 already reversed financing of Kaliwa Dam, other big projects from integrated PPP to hybrid PPP so that more China loans, China contractors will be committed/involved by his admin. Now even building coal power plants to be given to CN communist govt and its crony firms? #TRAIN money will pay for these new big loans, http://bworldonline.com/china-may-build-clean-coal-power.../

BWorld 197, Estimating electricity price hikes because of TRAIN, Part 2

* This is my article in BusinessWorld on March 19, 2018.

Part 1 of this short study was published in this column on Feb. 15. Some corrections and adjustments are made here because of (a) lower coal consumption for power generation, and (b) using an incremental increase in coal excise tax.

Total coal consumption in 2016 was 23.2 million tons but one industry player informed me that not all of these were used for coal power plants. Some were used for cement plants and other industrial uses. The estimated amount used for coal power generation is 20 million tons.

Coal excise tax before TRAIN (Tax Reform for Acceleration and Inclusion) was P10/ton, the law has increased this per ton to P50 in 2018, P100 in 2019, and P150 in 2020. The incremental increase is used in the table below.

Meralco computation of oil cost for their captive customers based on November 2017 data was 0.6 centavos/kWh in 2018 when oil tax is only P2.50/liter. There are no projections for 2019-2020 so I estimated the numbers for these years using the respective oil tax rates of P4.50 then P6/liter.

Oil share in Meralco power distribution that period was only 0.9% of total. In 2016, oil share to total power generation nationwide was 6.2%. So a multiplier of 7x (= 6.2/0.9) is used for the national oil tax rate.

Before, VAT on transmission charge was minimal, it applied only on ancillary service. With TRAIN, the VAT is applied on other transmission costs (power delivery, system operator, metering, etc.).

Hike in universal charge is not included here but this might be minimal. Many island provinces and remote islands of big provinces get electricity from gensets running on diesel. The generation cost is naturally high, from P10-20/kwh but residents there are not charged that full amount, a big portion is subsidized and passed on to all other consumers nationwide via the universal charge.

Last month, the Energy Policy Development Program (EPDP) published a new study, “Electricity prices and TRAIN” by Dr. Ramon L. Clarete. It is a neat study because it considered variations in heat content per coal type (Yes, not all coal are the same, the same way that not all dogs are the same). For brevity purposes, I added only a portion of his table 5 which summarize the projected hikes in electricity prices because of TRAIN (see table).

So from my estimates, there will be a projected electricity price hike in centavos/kWh of 13.4 this year, nearly 20 in 2019, and 24.6 in 2020.

The estimates by Dr. Clarete are much higher. By 2020, 14 centavos/kWh for coal plants and P1.67/kWh for diesel plants. VAT on these hikes are not included yet, and VAT on transmission charge also not included.

In addition, Dr. Clarete used coal price for 2016 in his study. The average price per ton of thermal coal was $70 in 2014, $58 in 2015, $66 in 2016, $85 in 2017 (Q1-Q3), data from statista.com. In the first three months of 2018 it is around $100 average.

So with 2018 prices about 50% higher than 2016 prices, the projected rise in electricity price from coal plants would be higher than his estimated 14 centavos/kWh, perhaps could go up to 18 centavos or higher.

These costs are for direct household electricity consumption alone. Not included are pass-on rates in the form of higher prices by factories, schools and universities, shops and malls, hotels and restaurants, hospitals and airports, etc. These enterprises consume tens of thousands of kWh per month, the additional electricity cost will be passed on the consumers, which might affect sales and hence, affect future salaries and benefits of workers.

The tax hike for coal and oil products is among the worst mistakes of TRAIN law. Retaining the high 12% VAT is another. Government has no justification in making cheaper energy become expensive. We hope that these mistakes will be recognized soon so that succeeding TRAIN 2, TRAIN 3, etc. will either reverse them, or at least not make them even worse.

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See also: 

BWorld 193, TRAIN, inflation and emerging DOE price control, March 16, 2018 

BWorld 194, How ‘pro-labor’ policies work against labor, March 17, 2018 

BWorld 195, Health alarmism in TRAIN sin tax hike, March 19, 2018 

BWorld 196, Mining tax and TRAIN, March 20, 2018

BWorld 188, Estimating electricity price hikes resulting from TRAIN

* 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.”

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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

BWorld 178, Top 8 energy news of 2017

* This is my article in BusinessWorld last January 2.

This should have been a “Top 10” list but due to space constraints, I limited it to only eight, divided into four news stories each for global and national.

GLOBAL

 1 “Non-news” to many media outlets but good and big news to me: NO major energy catastrophes in 2017. No major oil spill, no gas blowouts, no reactor meltdowns, no major infrastructure destroyed by natural disasters, and energy prices did not rebound to their 2014-2015 levels.

2 In June 2017, the British Petroleum (BP) Statistical Review of World Energy 2017 was released and among the highlights of that report are: (a) China and US remain the planet’s biggest energy consumers, (b) increases in oil, natural gas, nuclear and renewable energies (REs) but decline in coal use, (c) for big Asian economies, coal use remain very high especially in China, India, Japan, South Korea and Indonesia (see chart).

3 In September 2017, the US Energy Information Administration (EIA) released its “International Energy Outlook 2017” and among its projections are (a) In 2040, fossil fuels (oil, natural gas and coal) and nuclear will supply about 83% of global total energy consumption; 8% from hydro and 9% combined from wind, solar, geothermal, other REs, and (b) coal use is projected to be stable until 2040 and declines in China to be offset by increased use in India.

4 In November 2017, the “America First Energy Conference” was organized by the Heartland Institute in Houston Texas to analyze US President Trump’s pronouncement of US global “energy dominance”. “Energy dominance” is defined on two key goals: (a) meet all US domestic demand and (b) export to markets around the world at a level where they can “influence the market.” The important lessons from the papers presented are that (i) the US can have energy dominance in oil, natural gas and coal, but (ii) US cannot and should not aspire to have dominance in nuclear and REs. It was a very educational conference and I was the only Asian in the conference hall.

NATIONAL

5 Hike in excise tax for oil products and coal under TRAIN but zero excise tax for natural gas even if it is also a fossil fuel. Diesel tax will increase from zero in 2017 to P2.50/liter in 2018, P4.50 in 2019, and P6.00 in 2020. Gasoline tax will increase from P4.35/liter in 2017 to P7 in 2018, P9 in 2019, and P10 in 2020. Coal tax will increase from P10/ton in 2017 to P50 in 2018, P100 in 2019, P150 in 2020. There was successful maneuver by some senators, a known economist and some leftist organizations to spare natural gas from higher taxation, benefitting a big energy gas firm.

6 The feed-in-tariff (FiT) or guaranteed high price for 20 years for wind-solar and other renewables keeps rising, from only 4 centavos/kWh in 2015, became 12.40 centavos in 2016, 18 centavos in mid-2017 and petition for 22 centavos by late 2017 not granted. A pending 29 to 32 centavos/kWh by early 2018 is awaiting approval by the Energy Regulatory Commission (ERC).

7 Continued exemptions from VAT of the energy output of intermittent wind-solar and other renewables but stable fossil fuel sources were still slapped with 12% VAT under TRAIN. Government continues its multiple treatment of energy pricing: High favoritism for wind-solar, medium-favoritism for natgas, and zero favor for oil and coal.

8 Supreme Court issuance of TRO in the implementation of Retail Competition and Open Access (RCOA) provision of the Electric Power Industry Reform Act (EPIRA) of 2001. In particular, the SC TRO covered five ERC Resolutions from June 2015 to November 2016, affecting the voluntary participation of contestable customers (CCs) for 750-999 kW and many Retail Electricity Suppliers (RES) with expiring licenses cannot get new ones yet, reducing potential competition. Data from the Philippine Electricity Market Corporation (PEMC) show that as of Nov. 26, 2017, there were 28 RES, 12 local RES, 862 CCs for 1 MW and higher, and only 78 CCs for 750-999 KW. There should be thousands of CCs in the lower threshold, there should be several dozens of RES nationwide to spur tight competition in electricity supply and distribution.

Overall, EPIRA of 2001 was a good law that introduced competition, broke government monopoly in power generation, broke private geographical monopolies in power distribution. The RE law of 2008, SC TRO 2017 and TRAIN 2017 are partly reversing the gains of EPIRA.

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See also:

BWorld 170, The Habito carbon tax distortion, December 28, 2017 

BWorld 173, Energy favoritism under TRAIN, December 30, 2017 

BWorld 175, Trends in global and Philippine trade, January 05, 2018 

BWorld 176, Road trips and PPP projects, January 06, 2018 
BWorld 177, On MMDA car towing and impounding, January 07, 2018

Energy 105, When both world oil prices and domestic oil taxes are rising

Dutertenomics' tax-tax-tax implementation is off to bad timing. Raising oil taxes on already high and rising global oil prices -- $64 a barrel for WTI, nearly $70 for Brent -- is insensitive. But then again, even if the tax hike is P20 or P50/liter, the "money will go to the poor" naman daw is always a convenient, hollow, cavalier and opportunistic alibi.

"Diesel tax will increase from zero in 2017 to P2.50/liter in 2018, P4.50 in 2019, and P6.00 in 2020. Gasoline tax will increase from P4.35/liter in 2017 to P7 in 2018, P9 in 2019, and P10 in 2020. Coal tax will increase from P10/ton in 2017 to P50 in 2018, P100 in 2019, P150 in 2020." http://bworldonline.com/top-eight-energy-news-2017/

"the DoF is often quoted as saying that “two million richest Filipino families consume 50% of oil products in the country.” This is one of the reasons why they pushed for high tax hike for oil products.

There are about 25 million Filipino families now. The DoF refers to the richest 2 million families, so the other 23 million middle class and poorer class Filipinos consume the other 50% of oil products.... I think the DoF displayed dishonesty and deception in making that claim to further justify the high oil tax hikes." http://bworldonline.com/energy-favoritism-train/

Among the lousy supporters of "more taxes for oil please" and among the chief rah-rah cheerleaders of tax-tax-tax is the Action for Economic Reforms (AER). See for instance,

"Excise taxes on fuel products will be justifiably raised after 20 years of non-adjustment to inflation except for fuel that is primarily used for air travel, which can only be maximized by those who have more disposable income." http://bworldonline.com/public-interest-vested-interest/

Yes, poor farmers moving away from cow de carabao and using oil-guzzling tractors, moving away from manual harvest to oil-guzzling harvester-thresher combine machines should be penalized with higher oil taxes. Fisherfolks moving away from banka de sagwan and using motorboats to increase their fish harvest should be penalized with higher oil taxes. Great NGOs.

In one Senate comm. Hearing by Sen. Sonny Angara where I was also invited, the domestic shipping lines, airlines, bus lines, truckers, etc were saying the same thing -- if govt will push the high oil taxes, they will follow and obey the law but they will pass any price hike to the public. So even vegetables, fish, chicken, rice, etc consumed by the poor will experience price hikes. And DOF, AER, etc think this is fine and pro-poor daw.

LPG, from zero to P3/kilo. So the 11 kg LPG tank will experience P33/tank increase. The original DOF proposal was increase to P10/kilo or P110/tank. Even carinderias will also increase their food prices, or the less visible option -- serve smaller viand for the same price.

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See also:

Energy 102, Germany's CDU/CSU and FDP rejecting the Greens' anti-coal agenda, October 31, 2017 

Energy 103, The proposed Jamaica coalition in Germany -- before the collapse, November 25, 2017 

Energy 104, Ric Barcelona on energy investment and subsidies, December 12, 2017

BWorld 173, Energy favoritism under TRAIN

* This is my column in BusinessWorld last December 19, 2017.

The recently approved tax reform for acceleration and inclusion (TRAIN) by the Congressional Bicameral Committee exhibits a number of favoritism for some energy products and players while penalizing others. In particular, among the three fossil fuels, only petroleum products and coal received tax hike while natural gas was not mentioned and hence, not taxed.

In the VAT base expansion, expensive, unstable and intermittent renewable energy (RE) like wind-solar is again exempted (see table).

Here are the possible implications:

1. Since petroleum products are a public good, many goods and services will experience price hikes. Not only fares for jeepneys, buses, taxi, boats, and airplanes but also for agricultural products because most farmers now no longer use carabaos in tilling their farms, they use tractors, big and small; more farmers now also do not use human labor for harvesting rice, they use harvest + threshing combiner machines. Fishermen hardly use manual paddle boats, they use motorboats. Traders no longer use animals in transporting cargo, they use trucks.

2. Since coal power contributes 48% of total electricity production nationwide (2016 data) despite having only 34% of total installed power capacity, electricity prices will further go up, slowly but surely. Most apologists of raising coal taxes cite the “minimal impact” on households consuming 200 kWh/month. This may be true but those households work in factories, malls and hotels, schools and universities, hospitals and residential condos, airports and seaports. These establishments consume hundreds or thousands of MWh per month, not kWh of electricity. The additional cost will be passed on to the consumers.

3. Natural gas is also fossil fuel but it was never slapped with excise taxes. The Malampaya gas royalty is a tax on exploitation of a natural resource, the same way that the price of our imported petroleum and coal already include royalties. There is favoritism in exempting natural gas from excise tax. And there are some connections between some legislators and a known economist who pushed for high coal tax but silent on natural gas tax, with a big energy company whose main product is natural gas power generation.

4. Exempting RE from VAT but retaining VAT for fossil fuels. These REs are enjoying favoritism three times. First, this exemption from a high 12% VAT. Second, they are given guaranteed high prices for 20 years via feed-in-tariff (FiT). Third, they are given priority or mandatory dispatch to the grid even if they are expensive. For instance, FiT for solar1 is P10+/kWh, FiT for wind1 is P9+/kWh, average coal price is P4/kWh, can go down to P1.50/kWh on off-demand hours like midnight.

Soon, REs will be given a fourth privilege via the renewable portfolio standards (RPS), or minimum percentage of REs that electric cooperatives (ECs) and private distribution utilities (DUs) must purchase and distribute to households. REs then can price their electricity output high because these ECs and DUs have no choice, they will be penalized if they will not buy those expensive and intermittent REs.

Meanwhile, the DoF is often quoted as saying that “two million richest Filipino families consume 50% of oil products in the country.” This is one of the reasons why they pushed for high tax hike for oil products.

I have been intrigued by that repeated statement since last year and I am wondering what papers or studies justify this?

There are about 25 million Filipino families now. The DoF refers to the richest 2 million families, so the other 23 million middle class and poorer class Filipinos consume the other 50% of oil products.

The DoF is saying then that anytime in EDSA, NLEx, SLEx, roads in Visayas and Mindanao, etc. on average, about 50% of the cars, buses and trucks there transport the two million rich families and their goods? And that about half of domestic flights and the inter-island boat rides transport the richest two million families? This is absurd.

I think the DoF displayed dishonesty and deception in making that claim to further justify the high oil tax hikes. If such DoF claim has indeed objective basis, I am willing to apologize for this remark. For now, that statement is not backed up by solid numbers and hence, deceptive and opportunist.

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See also:
BWorld 166, US energy trading and implications for Asia and Philippines, November 26, 2017 

BWorld 170, The Habito carbon tax distortion, December 28, 2017 

BWorld 171, Global vs national tax reforms, December 29, 2017 

BWorld 172, Mining and natural disasters, December 30, 2017

BWorld 107, Top 10 myths for oil tax hike

* This is my article in BusinessWorld last January 17, 2017.

An excise tax is defined by the Department of Finance (DoF) as “a tax on products that have a negative effect on health or the environment... on nonessentials and luxury items.” With this definition, the DoF therefore, should abolish the tax on oil products, not increase it.

Here also are the 10 myths and alibi why the DoF and other sectors tend to demonize oil and are proposing oil tax to be as high as possible.

MYTH 1

OIL IS BAD FOR THE ENVIRONMENT.

Truth: Transportation of people and goods via cars, jeepneys, buses, and trucks that use oil is good for the environment because there will be no need for millions of cows, carabaos, or horses that produce tons of animal manure on the roads daily. Sure, there are particulates and other polluting gases but they are minor compared to tons of animal manure everywhere, more dirt, flies and worms in the environment. Also, cheaper LPG will encourage poor households to stop using firewood and charcoal for cooking which will result in more trees being saved.

MYTH 2

OIL IS BAD FOR PEOPLE’S HEALTH.

Truth: Cars, vans, jeepneys, and buses that use oil spare the oldies, sick, babies, pregnant women, etc. of hard labor and more diseases due to exposure to heat, rains, dust, and exhaustion if they were to ride bicycles or skateboards or animals that do not use oil. Also, transport of agricultural products from Ilocos, Cordillera, Cagayan Valley, or Bicol to Manila via animals not trucks will only lead to food spoilage. People will have little or no access to fresh vegetables and fruits, resulting in poor health.

MYTH 3

OIL IS NOT A PUBLIC GOOD.

Truth: Oil is a public good. As shown above, no petroleum, no modern and comfortable life, no mass production of food and transportation of people and goods. Public goods like public education, public health care, roads, bridges, etc. are either provided to the people for free or highly subsidized prices. Oil as a public good only needs zero tax, or at least low tax.

MYTH 4

MORE CO2 EMISSION FROM OIL MEANS MORE POLLUTION, MORE “MAN-MADE” CLIMATE CHANGE.

Truth: CO2 is not a pollutant gas; it is a useful gas. It is the gas that humans exhale, the gas that our pets and farm animals exhale, the gas that plants use to produce their own food via photosynthesis. Climate change is natural and cyclical. Planet Earth is 4.6B years old, there was climate change ever since marked by warming and cooling cycles.

MYTH 5

INCREASING THE OIL TAX IS NECESSARY TO FINANCE MORE PUBLIC INFRASTRUCTURE.

Truth: Government has trillions of pesos already from income taxes (corporate and individual), VAT; excise tax from alcohol, tobacco, mining, new vehicles; from documentary stamp tax, franchise tax, from annual vehicle registration tax, withholding tax, capital gains tax, travel tax. And from various regulatory fees (passport fees, driver’s licenses, terminal fees, etc.)

Government simply has too many personnel, officials, employees, consultants and pensioners; too many offices, travels, trainings, and meetings. Perhaps these items alone constitute about 70%-80% of the annual budget. So little is left for public infra, school buildings, government hospitals, etc.

MYTH 6

THE OIL TAX INCREASE WILL HAVE MINIMAL IMPACT ON THE POOR.

Truth: Oil is used by the poor not only in jeepneys but also in tricycles, farm tractors and harvesters, irrigation pumps, fishing boats, interisland boats, generator sets in off-grid islands. While the DoF plans to introduce “Pantawid Pasada” for jeepneys, nothing has been allotted for farm tractors and other equipment used by poorer farmers, fisherfolks, hunters, etc.

As shown below, fishing boats that use gasoline, tractors and irrigation pumps that use diesel, tricycles that also use gasoline, will be slapped with 12%-19% price hike simply because of the proposed tax hike (see table).

MYTH 7

THE OIL TAX INCREASE WILL HIT THE RICH MORE THAN THE POOR.

Truth: Oil use is a small portion of the overall consumption of the rich. The rich buy more expensive but more fuel-efficient cars and SUVs, they spend more on expensive restaurants, hotels, schools and universities, condos and subdivisions, etc.

MYTH 8

FOOD PRICES WILL NOT GO UP SIGNIFICANTLY WITH OIL TAX HIKE.

As mentioned above, oil is used not only by trucks, jeeps, and boats that transport agriculture, meat and fishery products. Oil is also used by farm tractors and harvesters, fishing boats. A 3.6% food inflation in 2016 (despite around 50% hike in diesel prices) is not small for the poor.

MYTH 9

NO OR LOW EXCISE TAX MEANS SUBSIDIZING THE OIL CONSUMPTION OF THE MIDDLE CLASS AND RICH.

Truth: There is no subsidy, zero, unlike subsidies for public education and health care or rice price subsidies using tax money. When you walk down the street and encounter a mugger who didn’t demand your money, you do not owe that mugger anything.

MYTH 10

GOVERNMENT IS LOSING SOME P145 BILLION/YEAR POTENTIAL OIL TAX REVENUES.

Truth: Government has no entitlement to more income and savings of the people other than income taxes that are already high, and other existing taxes. Government is losing more from wasteful spending or stolen money via corruption. Government can save more money for infrastructure by reducing too many personnel and consultants and by abolishing and defunding old welfare programs that do not work before it creates new welfare programs.

Bienvenido S. Oplas, Jr. is the head of Minimal Government Thinkers and a Fellow of SEANET. Both are members of Economic Freedom Network (EFN) Asia.

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See also:

BWorld 103, How to improve the RORO system, January 11, 2017 

BWorld 104, Top 10 positive news in Asian trade, January 14, 2017 
BWorld 106, Top 10 projections for Asian economies, January 23, 2017

Tax cut 26, Excise tax on petrol products should be reduced/abolished, not increased

"People try to live within their income so they can afford to pay taxes to a government that can't live within its income." - Robert Half

This bad tax measure has been proposed by the DOF and some legislators many years ago but never succeeded. This time, it looks different as the new Duterte government is hell-bent on having this become a law within the year or next year.

"The excise tax adjustment will entail, in the case of regular fuel, raising the levy from P4.35 a liter at present to P10 a liter next year, P10.40 a liter in 2018 and further to P12.17 a liter by 2022.

For diesel, from zero at present, an excise tax of P6 a liter would be slapped next year, P6.24 a liter in 2018, until it goes up to P7.30 a liter by 2022."

Bad. Very bad. But can be acceptable if personal income tax rates will be slashed to 20% max, better if 15% max. Otherwise, bad. Very bad.

This government can be bad if such huge tax hike in petroleum products is not compensated by huge income tax cut. 

Last July 12, 2016 during the first BusinessWorld Economic Forum, among Sec. Dominguez's proposals was a zero income tax for those earning P1 M/year or less, which is very good. Things have changed in just two months.

It is misleading for the DOF to say that only the top 10% of the population are the biggest consumers of gasoline. The most affected will be the small and micro entrepreneurs who can not easily raise prices because of the competitive environment.

The only mitigating or compensating measure here would be a huge income tax cut, so that people will have more money in their pockets that they must shell out back to government in the form of higher consumption taxes like excise tax for gasoline and diesel. Imagine, from zero to P6/liter. Very parasitic thinking by government. And obviously inspired or pushed by the WB, IMF, ADB, other foreign aid.

Now, the DOF proposed income tax cut is small.

Those earning zero to P250,000 a year, P2,500 in income tax in the first year;

more than P250,000 to P400,000, P2,500 plus 20 percent of the excess over P250,000;

more than P400,000 to P800,000, P32,500 plus 25 percent of the excess over P400,000;

more than P800,000 to P2 million, P132,500 plus 30 percent of the excess over P800,000;

more than P2 million to P5 million, P492,500 plus 32 percent of the excess over P2 million, and

more than P5 million, P1.45 million plus 35 percent of the excess over P5 million.

From 7 to 6 tiers. What Sec. Dominguez did here is to retain the 32% for those earning P2M to P5M, then 35% above P5M. Pakonswelo for those earning below P2M a year, they will pay only P132,500 + 30% of the excess over P0.8M.

It is very parasitic to claim that petroleum products are "public bads" that must be taxed as high as possible to have a "clean environment". NO. Petrol products are public goods, without them, there will be massive poverty, massive underdevelopment, massive hunger in this country.

People want to walk or ride bicycles or horses/cows over long distance because cars, buses, trucks, jeeps that use petrol products will be limited or curtailed? Huge volume of animal manure on the roads alone will make our environment dirty, foul and ugly.

If fisherfolks will use manual paddle of their fishing boats, if farmers will use carabaos or cows instead of faster and stronger tractors in tilling their farms, or harvesting and threshing their harvest, see the negative impact of very low agri and fishery productivity.

A friend, Peter A. commented,

"I'm all for this, our petroleum taxes are among the lowest among importing countries. I'd split the tax so that you can incentivize certain behavior. Higher taxes for fuel but a lower category similar to the current jeepney diesel subsidy to public transport (commercial passenger and trucks) , for private vehicles keep the higher tax category. In the long run you want to disincentivize individual car use as this makes livable cities difficult. This goes hand in hand with many other urban planning tools, like zoning, parking subsidies etc. Besides even with a Php 7 and Php12 tax, this is still lower than a few years ago so the economy can take it."

The low oil prices were important contributor for very low inflation rates in the PH in the last 2-3 years. Bringing back gas prices to near P50 or near P60 a liter, and diesel to near P40 a liter, will automatically push overall inflation rate to higher levels. And more poor people will complain. Then govt will say, "we need to raise further oil taxes to finance more subsidies to the poor." Vicious cycle.

If petrol taxes will rise at high levels, more people will buy motorcycles, or small cars with low oil consumption per kilometer, and the same traffic congestion we will experience. Meanwhile, the cost of transpo of rice, vegetable and fruit dealers, fish and meat dealers, both in trucks and boats, will rise. Which means they will pass the additional cost to the consumers. Petroleum is a public good, not public bad.

Peter added, "actually all we've learned from centuries of urban planning and learning how cities work show that this blunt initiative is effective in curtailing car use. It would work even better if, as I mentioned in my comment to Butch , we add more taxes on cars , parking ( add taxes and take out the inherent subsidies) and do congestion pricing. On a world wide level where cities have done this,it works. As for the inflationary aspect, take note that I'm for expanding the current subsidy on public transport, that includes any sort of regulated transportation that has a certificate of public convenience. We already have this with the jeeps, so expand this to buses, cargo trucks, taxis etc. So that the public good aspect is not affected. 80% of vehicles on the road is taken by 20% of the private vehicle owning public, we need to reverse this . If we take a look at the most succesfull capital cities private car use is but maybe 10%. This at least give the car owner a choice, to use public transport however ineffcient or pay a bit more. Add in all the other measures we'll surely have a more livable city."

Another reason why I want the PH to disintegrate into many countries. A central government will always impose a one size fits all policy. Whether a province or island has efficient mass public transport or not, the policy applies uniformly. The Manila-based government thinks that taking out more cars, motorcycles, buses from the roads to be replaced by trains (even if the infra in many areas are not there yet) will also apply to island-provinces like Masbate, Catanduanes, Bohol, Romblon, Camiguin, Biliran, Guimaras, Basilan, etc. For these islands, reliance on petroleum is very high, they cannot bike or run or ride a bus from their province to the next. They must ride a boat, then take a tricycle or jeep or bus to their destination. A rise in petrol prices by at least P6/liter will significantly affect their mobility, the cost of their goods and services traded across islands.

Instead of raising the excise tax for gasoline and imposing the tax on diesel, the government should do the opposite -- remove or drastically reduce the tax for gas, retain the zero excise tax for diesel. This will help reduce inflationary pressures. Government should learn to cut its spending, not the people's take home pay.

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See also:

Tax Cut 23: Tax Competition in Asia, Hikes in Europe, May 10, 2015 

Tax Cut 24, Tax reform forum in Ateneo, March 26, 2016 

Tax Cut 25, Presentation at Ateneo Ignite's Tax Exchange, June 04, 2016

Energy 50, Cheap oil, natural gas and coal prices

Last Saturday, a $35 a barrel oil at West Texas Intermediate (WTI) was breached. Airlines and shipping lines' fares should go down, more tourism. More farm mechanization, more cows and carabaos will be spared of heavy farm work. 

t 

http://oil-price.net/

Some oil products other than WTI and Brent are actually cheaper than these. Like Western Canada, Iraq heavy, etc.

Source: http://www.bloomberg.com/news/articles/2015-12-14/never-mind-35-the-world-s-cheapest-oil-is-already-close-to-20

The anti-fossil fuel planet saviours

Many of the tens of thousands of planet saviours and climate hangers who went to the UNFCCC COP 21 meeting in Paris who hate fossil fuel may be shivering with this development. They want the world to cut petroleum use while they do their frequent jet-setting global meetings and junkets on airplanes that fly and cars that run on petroleum.

They will dislike that there will be more trucks, more buses, more cars, more planes, more ships that move more people and goods across cities, islands, countries and continents, as oil prices keep falling.

The animal rights activists should welcome this development too. Millions of cows, carabaos, horses, other big animals will be spared of heavy and punishing farm work as it is cheaper and faster to use more tractors and machines than those animals.

OPEC now a price taker, not price dictator

The old, tested greed by OPEC member-governments have been shattered by heavy competition from shale gas/oil drillers and producers in the US, Canada, etc. Before, whenever oil prices fall down, OPEC would quickly cut their output from 30 M barrels per day (bpd) to around 29 M bpd. Now they cannot and will not do that. They are forced to keep producing at 30-31 M bpd, accept low prices and lower revenues, just to keep their market share.

The rest of us, oil consumers around the world, benefit from this global competition among oil and gas producers. In the Philippines, the minor Peso/$ depreciation contributed to small price rollback. Besides, the $35 per barrel is for 1 or 2 months delivery, meaning by January or February 2016, not December 2015.

Peak Oil theory is discredited

Peak oil, along with peak food and Malthusian hypothesis, climate alarmism, discredited. The short- and medium-term scenario is that world oil prices will hover between $40-$60, still low compared to 2012-2013 levels of nearly $100. And lower than the past decade's prices.

We are in a period of cheaper energy, cheaper food, longer lifespan, healthier people. The problem of many economies now is more fat/obese people than thin and undernourished people. When people die at 50 or 60 yrs old, some would say, "he/she died young". In 1900, when a person dies at 40 or 50 yrs old, that's "long" already because life expectancy was only around 33 years.

So few decades from now, if a person dies at 70-80 yrs old, other people will say, "he/she died young." Why, because average life expectancy then will be at around 100, 110 yrs old.

Regulated fares and the LTFRB

But why despite oil and fuel prices going down, public vehicles in the Philippines do not automatically bring down their fares?  When fuel prices go up, PUV operators and drivers ask for a fare hike again.

The Land Transport Franchising Regulatory Board (LTFRB) of the DOTC is a jerk government agency. MARINA (regulator for shipping companies and operators) and CAB (regulator for airlines) allow fare deregulation. So airlines' fares can go up or down depending on the travel season. The LTFRB officials, past and present, are among the hard-core central planning bureaucrats. No fares can go up or down unless they give permits, unless they affix their signatures.

Not only world oil prices, natural gas prices are also falling, chart over the last 7 1/2 years. More energy at cheaper price, more prosperity.

http://www.infomine.com/investment/metal-prices/natural-gas/all/

And world coal prices too. Since the Paris climate agreement is non-binding, no penalties for countries that do not obey their promised emission cuts, then more developing countries like India, China, Indonesia, Philippines, Brazil, etc. will be using this energy source to further empower their economy. Rich countries too like Japan and the US. Prices chart over the last 14 years.

http://www.infomine.com/investment/metal-prices/coal/all/

Global capitalist competition will spring us more surprises, for the better. There are lots of shale gas/oil rigs that have been temporarily closed because of low prices. But there are lots more shale oil and gas deposits around. More global prosperity is the game.

Deflation

Yes, cheap energy prices can contribute to deflation or declining overall prices of commodities and services. But it will be a good type of deflation. More output per unit of input. In this case, more oil, more natural gas, per rig.

There is a distinction between good and bad deflation. The good is productivity-driven (cheap oil, cheaper mobile phones and flat tv, cheaper food and shoes, etc.). The bad deflation is due to poor economic outlook in the future (people seldom spend even if they have the money).

There is little role for governments in this type of deflation, and they should not intervene more, like imposing higher petroleum taxes. The WB and IMF have been lobbying for this tax hike for sometime now. They believe that petroleum being a "public bad" should be taxed more. Nehh? Those WB, IMF, UN, other multilaterals' officials and bureaucrats love to jet-set and travel a lot, on petroleum-powered planes and SUVs, meaning it is useful for them, then declare petroleum as a "public bad"?
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See also:

Energy 41, On low global oil prices, September 05, 2015

Energy 46, Dominance of coal power worldwide, October 31, 2015 

Energy 47, Low capacity factor of wind, solar and biomass plants, November 04, 2015 

Energy 48, US energy subsidies and global energy consumption, November 06, 2015 

Energy 49, Malaysia's and Singapore's bright nights and nat gas power, November 21, 2015

Tax Cut 20: On the Excise Tax on Gasoline, Various Regulatory Fees

Prof. Amado "Bong" Mendoza of the UP Political Science Department wrote another good article yesterday on tax policy.

Part of his paper mentioned a low tax-GDP ratio (T/GDP) of only 12 percent in 2011, in reference to other data and points raised by WB consultant and now UPSE visiting Prof. Rosa Maria Alonso  Terme. I commented that those measurements of low T/GDP ratio are wrong because such measurement counts only the collections of the BIR + BOC in computing T. It excludes other collections: 

1. Collections by local government units (LGUs) of various taxes (real prop. tax, residence tax, various business taxes) and regulatory fees (sanitation fee, fire dept fee, bldg permit fee, Mayor's permit fee,...).

2. Collectios of various regulatory fees by other agencies: DFA's passport fee, DOT/PTA's travel tax, NAIA's terminal fee, DOTC's vehicle registration tax, driver's license fee; PNP's police clearance fee, DOJ's NBI clearance fee, NSO's birth cert fee, death cert fee, marriage cert fee, and so on.

3. Collections of various fines and penalties by both national and local governments. More prohibitions in society, more violations to catch and penalize, more revenues to collect.

4. Collections of mandatory and forced monthly contributions by the SSS, GSIS, PhilHealth, PagIBIG, etc.

If these various payment to government, by hook or by hook, are included in the tax collections by BIR + BOC, a T/GDP ratio of 25 percent or higher is possible.

Singapore, Hong Kong, other governments with no or little LGUs have tax revenue that are almost equal to total revenues. In governments with many LGUs, many government corporations and financial institutions, many departments having their own collections and mandatory fees system, the total revenues are much much larger than the usual T/GDP ratio. It is an old trick by the WB, IMF, ADB, other foreign aid bodies to justify and rally a rah-rah-rah, more-taxes-rah campaign and lobbying.

Talking about government provision of public goods, the best "quality public goods" that the PH or any government can give its citizens is to have rule of law. The law rules over governors and governed, administrators and administered. The law applies equally to unequal people, no one is exempted and no one can grant an exception. Thus, the law against stealing and robbery, the law against killing and murder, the law against abduction and rape, the law protecting private property, applies to all. 

Then people will have peace of mind and have high respect for government. When there is government failure in rule of law promulgation, then one can expect government failure in many of its avowed welfarist functions. All other axation to justify multiple, endless welfarist functions lose their value.

Some sectors are proposing that taxes on petroleum products should be raised further. They are echoing the old WB and other foreign aid lobbying. They are wrong of course because petroleum is a useful product, it should not be penalized with more taxes. If people think that petroleum is a socially-bad product and hence, must be taxed as high as possible to discourage its frequent use, then they may be suggesting implicitly that we should ride carabaos, horses or bicycles to work or bring our kids to school so that we will use less or zero petroleum products. 

But petroleum is a socially-useful product. Government should in fact reduce taxes on it, and in particular, abolish the excise tax on gasoline, only VAT, import duties and related taxes should apply.

The main arguments by those advocating for more, higher petroleum tax, are: (1) Gasoline pollutes and creates traffic; increasing the tax will alleviate these twin problems; (2) Gasoline is mainly consumed by the rich and the middle class; hence a higher tax on gasoline is progressive; and (3) Petroleum products are imported, and scarce resources.

I disagree with these arguments of course.

1. Non-gasoline transportation of goods and cargo (via carabaos, horses, cows, etc.) creates more animal dung and urine pollution, creates more traffic as they move very slow. To transport Dagupan bangus or Batangas tilapia to Manila via animals will take several days, the bangus and tilapia reach Manila either rotten or in dried fish form.

2. Gasoline is used by tricycle drivers, taxi drivers, and other non-rich people. Besides, what is wrong with the middle class and rich driving a car? People work hard to have more convenience in life and this is not a bad or criminal goal. Those who demonize car ownership may consider not owning or driving one and ride bicycles only.

3. All imported products from mobile phones, laptops, flat tv, buses, boats, medicines, processed foods, etc. are also scarce. The price of a product or service is a reflection of its scarcity or non-scarcity. Gold and diamond are very scarce to find and hence, their prices are very high. Air is non-scarce, it is abundant hence, its price is zero. Unless one is into scuba diving, then air in scuba tank has a price and not free.

So government should either abolish the excsie tax on gasoline, or all other imported goods should be slapped with excise tax too.

Many environmentalists and anti-capitalism activists who demonize fossil fuel capitalism are actually car-owners too; they frequently ride planes for their meetings and activities across the country or around the world. And all airplanes use that "bad" (if not "evil") product called petroleum.

Back to the basic function of government -- yes, there is a need for government. Promulgate the rule of law. Of what use to a poor man that he gets free PhilHealth card, free education for the kids, free conditional cash monthly, subsidized train rides, etc. but his tricycle or 2nd-hand jeep or car can be easily stolen by other people; or the kids can be easily abducted and raped or murdered; the small piece of land he inherited or bought can be easily land grabbed by influential people?

Protection of private property, protection of human life, government role is needed and recognized, and taxation to allow government to do this job is needed. All other functions are secondary or unnecessary, as most functions can be provided by the private sector under a voluntary exchange system. Thus, the various taxes and mandatory fees to justify those secondary or non-necessary government functions should be significantly cut, if not abolished.

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See also:
Tax Cut 16: Conserving Fishery Resources by Taxing Demersal Fish Catch?, May 27, 2013 
Tax Cut 17: BIR vs. Physicians, March 06, 2014
Tax Cut 18: On 10% Flat Tax, Greco Belgica and GDP Growth, March 27, 2014
Tax Cut 19: Letter to Sen. Sonny Angara Re. SB 2149, June 06, 2014