The big story of prime time TV news Tuesday night was not about drug-related killings, unwarranted fears that Mr. Duterte would go sockless in a society as polite as Tokyo, or D30’s latest harsh words against the Americans. D30 is, first and foremost, a maverick. A maverick who softens after the initial outburst, then gets an excellent rating from cheering Pinoys.
It was prime-time TV’s belated reportage on the details of the tax reform package, which was extensively reported by the print media in September. The TV report on the proposed P6 per-liter tax on diesel stunned a nation predisposed to believe that every move of Mr. Duterte’s government is pro-poor and pro-masa.
The sum of the masa’s reaction? How could he? That was a shorter, more straightforward version of this reaction made by Rep. Edcel Lagman in September, after the details of the proposed tax reform package were transmitted to the House.
“Since the burden of excise taxes on petroleum products cascades to the ultimate consumer or the general public, the brunt of the tax will be borne by ordinary people who constitute the bulk of the consuming public and who will not benefit from the tax package,” Mr. Lagman said. The Makabayan bloc of the House has vowed to amend the reform package to rid it of its anti-people provisions.
The fears of the masa are valid and warranted. Let us start with the major users of diesel. These are 1) all forms of public transportation with the exception of taxis and taxis wannabes such as Uber and Grab units ( diesel-run taxis are a minority), 2) diesel –fed power generation barges and plants and 3) trucks that haul the basic stuff household, commercial and industrial firms need.
A back-of-the-envelope calculation is this. A P6 tax on diesel, which will automatically show on the pump price as a P6 addition or more, will jack up the operating costs of all PUVs running on diesel, the jeepneys, the AUVs, the metropolitan and provincial buses. If fuel now makes up 25 to 30 percent of their operating costs, the diesel price increase will move the needle to around 35 percent ore more of operating costs, which is not factored in the current fare structure.
The PUVs will be forced to seek a fare increase.
Now, it is the diesel-fed PUVs that ferry the Everyman, from the Babuyan Island Group down to the last islet in the South. In Metro Manila, more than 90 percent of the medium-distance commuters that cannot be accommodated by the MRT 3/LRT units take the metropolitan buses – which make up the de facto mass transport in the metropolis whether we like it or not. Despite the recklessness of some metro buses, you have to appreciate the tenacity of their drivers that have to face the daily gridlocks. You place yourself in their shoes – daily drives from Makati to Novaliches 21 days a month.
Those who ply the routes, say, between Cagayan up north to their terminals in Pasay City have to have the patience of Job, and these are the provincial buses.
A transport fare increase, in short, will hit the Everyman and hit them hard. The short distance commuters, the medium-distance commuters and the long haul passengers. It will be an across-the-board hit. Considering that transport is now just as important as food and shelter costs, any fare increase will be a big drag on the incomes of the Everyman.
A diesel price increase will jack up, again, the transport costs for food items, raw materials for the factories, most if not all of consumer goods, most if not all goods required by agricultural producers. The P14.50 per kilo price of yellow corn, for example, that I buy from Isabela would probably be P15.50 per kilo after the diesel price increase. The same with soya, rice bran and other ingredients. The truckers can’t live on the current freight charges after a P6 per-liter tax shall have been slapped on diesel.
What about the diesel-powered barges in our electricity-short country?
What kind of inflationary pressure would a diesel tax bring?
More, this is the most unfortunate time for the government to propose a tax on fuel. The September agreement of the OPEC to cut down production by around 700,000 barrels a day is the first in a series of muscle-flexing that the cartel is planning to carry out – to influence a rise in the global prices of crude. Even with the OPEC ‘s weakening hold on total supply (it now supplies around 40 percent of global needs, compared with the 70 percent three decades ago), any cartel-like muscle flexing would be felt by the global market.
After the September agreement to reduce production, crude prices have risen by 5 percent. For an oil-starved country such as the Philippines that matters a lot.
So the proposed tax on fuel, especially the P6 tax on diesel, will harm the pockets and the stomachs of the Everyman and hit these hard. It will hurt the broader economy because it would be inflationary. The proposed tax is not just an innocent, innocuous item on the tax reform package. It is grievous harm stated in bland language. Taxing fuel will have an inevitable result. It will fuel mass outrage from the masa.