High coal tax risking manufacturing growth goal

Lopez told reporters that if the Senate’s version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill would be enacted into law, the manufacturing sector would face higher power cost. (Photo By:Philippine Information Agency – Philippine Information Agency, Public Domain)

MANILA — Department of Trade and Industry (DTI) Secretary Ramon Lopez said it would be more challenging for the local manufacturing sector to achieve more than 10 percent growth target in the next few years as higher excise tax on coal looms.

Lopez told reporters that if the Senate’s version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill would be enacted into law, the manufacturing sector would face higher power cost.

Under the upper house’s TRAIN bill, it will hike excise tax on coal to PHP300 per metric ton by 2020 from the current PHP10 per metric ton excise tax.

“It will be a challenge, obviously. It will be a much higher cost for the power,” he said.

A large portion of cost in manufacturing is power.

During the National Exporters Conference on Tuesday, Senator Sherwin Gatchalian, who is also the chair of Senate Committee on Energy, said that the Philippines had the highest electricity cost for industry, commercial, and residential rates among the ASEAN-5.

Last week, the DTI chief said the country could achieve more than 10 percent manufacturing growth annually within the Duterte administration, increasing from the department’s initial target of 8.0 to 10 percent.

“It’s true, we can actually surpass 10 percent growth in the manufacturing sector but I’m afraid with this unclear imposition, we might see a slowdown in a manufacturing sector especially now that it is too dependent on electricity,” said Gatchalian.

“If you want to boost our sector, our industry, we need competitive electricity prices,” he stressed.

In the third quarter of the year, manufacturing sector grew 9.4 percent, having the highest contribution to the gross domestic product (GDP) growth in Q3 2017.

The DTI has launched in 2012 the Industry Development Plan (IDP) to boost the manufacturing sector and increase its share to GDP and job generation.

With the IDP, manufacturing sector’s average growth accelerated to 7.3 percent from 2012 to 2016 compared to average growth of 3.8 percent from 2007 to 2011. (PNA)