THE GOVERNMENT is considering lowering import tariffs to a uniform 5% rate for selected basic commodities as part of a broader effort to contain inflation.
“We are now considering reducing the tariff on those products like pork, corn and feed wheat, and fish. And therefore the economic managers are confident, that inflation will taper off in the second half of the year and it will go back to its normal range of 2-4% next year,” Budget Secretary Benjamin E. Diokno said in a briefing on Wednesday.
Inflation accelerated further to 5.7% in July, and now averages 4.5% in the seven months to July, breaching the upper end of the central bank’s target range.
“We’re leaning towards a uniform reduction to 5%. It’s not zero. But right now the tariffs are 20-30%. We want to make it 5% so it’s simpler, more uniform, a standard rate like five. It’s kind of neutral in the sense that it does not affect the consumption of goods,” Mr. Diokno said.
He said that the revenue losses from the tariff reductions are not expected to be significant.
Speaker Gloria M. Macapagal-Arroyo met with economic managers last week to propose measures against inflation, such as bringing meat and fish import tariffs to zero, among others.
Mr. Diokno said that the plan to lower tariffs was discussed in the Cabinet meeting last month, before the meeting with Ms. Arroyo, but noted that the economic managers “appreciate” her input.
“We are now in the process of deliberating on reducing the tariffs,” Socioeconomic Planning Secretary Ernesto M. Pernia said, noting that the economic team will meet on Friday to discuss further action.
Mr. Pernia said that the plan to lower tariffs will be temporary, returning to previous levels by 2019, as inflation is expected to be within the target range by then.
“That’s temporary (until inflation) goes back to the 2-4% next year,” Mr. Pernia said on the sidelines of a Senate hearing yesterday.
Congress has adjusted the legislative calendar for a recess between Aug. 16 and Aug. 27, which would permit President Rodrigo R. Duterte to lower tariffs via an Executive Order, as he is authorized to do under the Customs Modernization and Tariff Act, or Republic Act No. 10863.
Senate Minority Leader Franklin M. Drilon that such a move would “weaken further the agriculture sector.”
Asked to comment, Bernardo M. Villegas, an economics professor at the University of Asia & the Pacific, said that the foregone revenue and the potential weakening in the competitiveness of domestic goods is a worthwhile trade-off for lower inflation.
“It is worth it because the most important consideration at the moment is to alleviate the sufferings of the lower-income households because of high food prices,” he said in an e-mail.
Mr. Diokno said that the proposed lowering of tariff rates comes on top of the move to liberalize rice imports while collecting higher tariffs on imports of the staple. The tariff system is expected to reduce retail prices for rice by P7 per kilogram, while the tariffs will help fund measures to raise the competitiveness of the domestic rice industry by increasing mechanization and providing crop finance and insurance.
The rice tariff bill has hurdled the House of Representatives and remains pending in the Senate. It contemplates a 35% tariff on rice imports, in line with regional levels.
“All of (tariffs collected) will be put to good use, to provide assistance to farmers to become more productive so that we can compete,” he said.
“We will not give them cash gifts. We will invest in small irrigation facilities, high-yielding seed varieties, mechanization… this investment will increase productivity in agriculture,” Mr. Diokno added. — Elijah Joseph C. Tubayan