February inflation seen at 4.1%

The higher excise tax rates slapped on “sin” products such as cigarettes at the start of the year pushed inflation faster in February to possibly hit a more than three-year high of 4.1 percent, the Department of Finance said Monday.

“Food and nonfood commodities alike see their respective rate of price increase relatively unchanged while those of sin products may have likely accelerated. The latter may be explained partly by price increase due to sin tax hikes and partly by the appropriate price adjustments of Mighty Corp. following its paying the right amount of taxes,” DOF Undersecretary and chief economist Gil S. Beltran said in an economic bulletin.

A headline inflation of 4.1 percent year-on-year will be the fastest since the 4.3 percent posted in October 2014.

Under Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the unitary excise tax slapped on cigarettes rose to P32.50 a pack effective Jan. 1 from P30 a pack last year.

The TRAIN law also mandated a further increase in the cigarette excise tax rates to P35 a pack from July 1, 2018, to Dec. 31, 2019; P37.50 a pack from Jan. 1, 2020, to Dec. 31, 2021, and P40 from Jan. 1, 2022, to Dec. 31, 2023.

Signed by President Duterte in December, the TRAIN law starting Jan. 1 this year also jacked up or slapped new excise taxes on oil, cigarettes, sugary drinks and vehicles, among other goods, to compensate for the restructured personal income tax regime that raised the tax-exempt cap to an annual salary of P250,000.

Finance Undersecretary Karl Kendrick T. Chua earlier said the higher inflation in January was due to “better compliance in tobacco tax.”

For Beltran, while the 4.1-percent forecast may have breached the high end of the target range, it was largely on account of the price increase of sin products.—BEN O. DE VERA