Convenient Train law excuse

Coca-Cola Femsa Philippines, Inc. announced recently it was terminating the employment of some of its employees due to “recent developments within the beverage industry and in the business landscape as a whole.”

It did not disclose the actual number of employees who will lose their jobs, but its local union said around 600 of its members were expected to receive their walking papers by March.

Although the manufacturers of the iconic beverage drink did not particularly cite financial considerations for its planned restructuring (the politically correct term for layoffs or abolition of employment positions), there are speculations the Tax Reform for Acceleration and Inclusion (TRAIN) Llaw had something to do with it.

The TRAIN Law’s P6 per liter tax on beverages using caloric and noncaloric sweeteners and P12 per liter tax on beverages using high fructose corn syrup will increase the cost of Coca-Cola’s products and other similarly situated beverages.

The rise in the prices of these products is expected to reduce the demand for them. With the prices of basic commodities also anticipated to go up because of the TRAIN Law, nonessential products such as beverages may cease to be included in the consumers’ market list.

Common business sense would oblige manufacturers of products whose taxes have been increased by the TRAIN Law, e.g., oil products, cigarettes, sugary drinks and motor vehicles, to raise their prices to cover the cost of the additional financial burden.

Even if there is no change in their taxes, the tax increase on oil products would give them no choice but pass on the added transport costs to customers.

According to the Departments of Finance and Trade and Industry, the TRAIN Law would have minimal effect on the prices of the affected products and services. Based on their tabletop analysis, any price increase should not exceed 5 percent.

In theory, under ideal circumstances and certain academic assumptions, that forecast should hold true. But the reality on the ground is, projections of that nature often turn out to be unrealistic or too optimistic to be true.

Regardless of the government’s rosy assurances, prices of products and services that are affected, directly and indirectly, by the TRAIN Law will go up and there is no telling to what extent. Market forces have uncanny ways of making predictions by economists or financial experts go haywire or make their faces red.

The effects of the TRAIN Law on the prices of the affected products are already being felt in gasoline stations, public markets and other outlets. No media report or validation is necessary for that purpose.

It’s just a matter of time before this development is used (or exploited) by some business entities as an excuse to justify the termination of the employment of some of their employees in the guise of so-called reorganization, downsizing or retooling of corporate structures.

This was what happened in 1994 and 2006 when the value-added tax (VAT) laws took effect and imposed a 10-percent and 12-percent VAT, respectively, on goods and services.

VAT became a convenient excuse by some employers to explain the closure of their business or the loss of jobs. The more crafty employers even used it to avoid payment of certain employment benefits or reduction of the separation pay due to substantial business losses.

The fact is, there is nothing the Department of Labor and Employment, or any government office for that matter, can do if a business entity cites the TRAIN Law as its basis for closing shop or letting go its employee.

Given this situation, the least DOLE can do is make sure that if the TRAIN Law is invoked as an excuse for the termination of employment, the claim is truthful or supported by clear and convincing proof.

Assuming the termination is in order, the procedures provided for in the Labor Code for such action should be complied with and the separation pay given to employees are consistent with the law or the company’s collective bargaining agreement.