ECONOMICS REACTION PAPER (II)

Article:  Gov't looks at raising 'sin taxes'





MANILA, Philippines – The government is more keen on raising "sin taxes" than value-added tax (VAT) to increase revenues, a Department of Finance (DOF) official said.

DOF Undersecretary Gil Beltran said in a statement that the government is looking into the passage of a bill that will impose higher taxes on sin products like alcohol and tobacco to help contain the government's budget deficit.  Beltran said the bill may be filed in Congress next year.

"We have started looking at the revenue impacts of several proposed tax measures, and by next year, we will start filing [new bills]," he said.

In its first year, the Aquino administration has been running after alleged tax evaders to boost state revenue without raising taxes.

Finance Secretary Cesar Purisima earlier said the government wants to plug tax leaks before introducing new tax measures, including raising sin taxes. Aquino has ordered no higher tax hikes until the government has managed to plug tax leaks, Purisima added.

"Down the road, I would like us to go to Congress, but after we have done our homework then we will have the moral ascendancy to ask for increases," he said. Last month, legislators submitted a proposal to reform the sin-tax structure, which will raise excise collection from the cigarette industry.

Eyeing an 83% rise in cigarette prices from where they are at present, lawmakers Niel Tupas and Dina Abad of the Liberal Party said the government can generate nearly P200 billion from sin taxes over a 3-year period plan.

The proponents are seeking to get the bill passed soon, so the project can start next year. The government will go through the plan, despite then-presidential candidate Aquino’s promise that no new or higher taxes will be imposed in his term.

REACTION:
    Everytime I hear the word "tax", one thing that will pop out of my mind is the negative political connotation of the word itself.  Questions and expressions like "Saan napupunta ang mga buhis na aming binabayad?", "Kurakot na naman." and "Saan na ang mga benepisyo?". These words are merely spoken by the Filipinos who are working hard and paying their tax well. These people are expecting for some benefits because it is their money, it is OUR money. Government officials deserve some of it but not too much for it is mainly for the people who are paying and not for them. They are not in the position to make themselves more richer... They are there to serve us, the people!

     In the article, another form of tax will be implemented. For me, it is better than the VAT (Value-Added Tax) because sin taxes are for the people accomadating such items like alcohol and cigarettes that are reagarded as neither necessity nor luxury. These things also are not good for us especially when we talk about health.  I think it is mainly for the people who are engaged in smoking and drinking. For me, it is good for it is one way of making them stop doing it. Unlike the VAT, all were affected and made us sinking deeper into debt.
   
      As a whole, tax cannot be avoided. It is also a fair way of paying services. The only thing that is unhealthy when it comes to this thing is the officials who were managing and only thinking of their own good, not for the betterment of people. If only government thought of this one, it could be better in political and economic aspects.

ECONOMICS REACTION PAPER

Article: PH's long battle vs inflation far over HSBC

MANILA, Philippines - The 4.3% inflation rate in March may have been tamer than forecasts, but an economist for Hong Kong and Shanghai Banking Corporation (HSBC) said he remains cautious as global oil and food prices remain a threat.

 "The battle against inflation is far from over, and we expect the [Bangko Sentral ng Pilipinas] to continue tightening at the next meeting," Sherman Chan, HSBC's economist for ASEAN, said in a report on Tuesday.

He said that they expect the BSP to announce another 25 basis points rake hike when the monetary officials meet on May 5 as global oil and food prices will "trickle down the Philippine economy, leading to further acceleration in inflation over the next 6 months."Monetary officials hiked rates by 25 basis - the first since 2009 - last March 24.
In the first quarter of 2011, food prices accelerated to 2.3% quarter-on-quarter, compared with the previous increase of 1.3%.

In March, both food and core items showed sharp upticks, pushing the 4.3% inflation to the upper half of the BSP's target band of 3% to 5%."We believe there is some way to go before we see the peak in the current cycle, especially in light of the recent spike in global oil prices as well as a continued surge in global food prices," Chan wrote.He also noted that the impact of the disasters in Japan could "further cloud the region's growth outlook."

"It is too early for the BSP to breath a sigh of relief," he wrote.



Reaction:

Inflation is an inevitable property of any economy in the world. In simple words, inflation is the rise of general level of prices. However, inflation is a much more complex phenomenon than simply the increase of prices.

The first reaction to the term inflation, in most cases, is negative because generally increasing of prices. For me, when it comes to inflation, I have the two sides of reaction which one is positive and other is negative. It is positive because increasing of inflation rate means decreasing of unemployment which means it is a good for us and it indicates a healthy economy but ,as I observe especially for Filipinos, it is in different way. Increasing of prices is such a problem for us. For others would say that if there will be increasing of prices, there must be increasing of wages for Filipinos to accept inflation.

As an example and a situation for myself, I would admit that I rather go to sales in malls than going to buy regular-priced products. But I realized, it would be better to go with regular-priced products for it creates stable circumstances for everyone especially when we talk about employment and wages.

Another way to look at inflation is that it is an increase of the quantity of money in relation to the trade of goods in a society. Banks, like BSP, fight inflation by decreasing money supply, and by setting high interest rates. In addition, governments can institute wage and price controls to fight excessive inflation rates. However, this method has several negative outcomes; price control distorts the overall functioning of nation’s economy because it encourages decreases in products’ quality, shortages, etc. May the Philippine government have the right things in dealing with this and good outcomes afterwards.