Pandering to demagoguery

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By pressuring the Duterte administration to succumb to the popular but not necessarily rational sentiment to suspend the implementation of additional excise taxes on fuel next year, Sen. Sherwin Gatchalian is pandering to demagoguery.

Initially, Gatchalian merely appealed to the administration to suspend the implementation of the second tranche of excise tax on fuel as mandated under the Tax Reform for Acceleration and Inclusion (TRAIN) law. There is nothing fundamentally wrong with that.

However, in a subsequent statement, the lawmaker threatened the administration in no subtle way that the passage of the proposed 2019 budget will be stalled unless Malacañang caves in to demands for the suspension.

By doing so, he stepped out of bounds of the gentlemanly conduct of persuading the administration to agree to his suggestion purely by dint of logic of his proposition.

In so doing, he transformed into an aggressive opponent who is arm-twisting the administration to surrender to his personal demands.

A lawmaker warned that the country’s growth will likely further slow down as the government continues to struggle in containing inflation if the Duterte administration insists on implementing the increase.

Indeed, the third quarter GDP slowed down to 6.1 percent as rising inflation dampened consumer spending, a major growth driver although the figure was slightly higher than the 6.0 percent the previous quarter.

At first blush, Gatchalian’s call for the suspension of the excise taxes on gasoline and diesel next year seemed a rational proposition. However, even a cursory examination of facts reveals the folly of the senator’s stance.

Under the TRAIN law, an increase of P2.50 per liter of gasoline and diesel in excise taxes was imposed at the start of the year. The next round of P2 per liter will be added in 2019, or a total of P4.50 in hikes since the law took effect in January this year.

The spike in inflation in the third quarter was triggered by the sudden increase in the prices of crude in the world market, and consequently, higher fuel costs in the country.

But by no means was the fuel price the singular factor that unleashed the inflationary forces. It was a combination of various other factors, domestic and international, including the rice crisis and the weakening of the peso against the dollar.

For eight consecutive weeks now, local oil companies have been implementing hefty rollbacks in the prices of gasoline and diesel, the last three by at least P2 per liter. Even if the government imposed the additional P2 excise tax per liter and the prices remained stable, the new round of tax would be offset by the successive rollbacks, giving the consumers a net advantage.

Likewise, oil prices in the world market, which had breached the $80 per barrel level, dipped to around $60 per barrel and are likely to stay around that level.

According to Fitch Solutions, even an expected supply cut led by the Organization of the Petroleum Exporting Countries (OPEC) following an official meeting on 6 December “may not be enough to counteract the bearish forces.”

On the other hand, the rice supply seemed to have stabilized, while the peso has regained strength and is now around P50 to a US dollar.

There is no reason to suspend the excise tax on fuel as the resulting revenue losses would drag down the momentum of the administration’s “Build, Build, Build” program.

In fact, Gatchalian voted in favor of the TRAIN law, which has a provision that the increase in the excise tax can be suspended if the three-month average price of Dubai crude reaches at least $80 per barrel. His only reservation was on the coal tax, not on the fuel tax.

“Despite my affirmative vote, I would like to put on record that I still maintain my reservations regarding the massive increase in the excise tax on coal that has made it into the final version of the law for the President’s signature,” he said in a press statement released on 14 December 2017.

It is thus puzzling why the lawmaker is aggressively opposing the implementation of a law that he supported.

But it would not be fair to speculate that he took the position for the benefit of his family, which has interests in manufacturing, hotels and casinos.

Or is he somehow trying to distance himself from the current administration, which is in its midterm, so that he can have some political elbow-room to maneuver in the 2022 elections?
By fanning popular sentiments, he can indeed gain some political exposure.

Whatever his reasons are, the rationale for his proposal is flawed and his stance hypocritical.

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