March 9, 2006
HIGHER VAT RATE HIKES FEBRUARY COST OF LIVING
Higher inflation caused by sales tax increases in February hiked the cost of living to more than double the legislated minimum wage in Metro Manila, according to independent think-tank IBON Foundation.
According to the National Statistics Office (NSO), the national inflation rate in February reached an eight month high of 7.6% due to higher fuel prices and an increase in the value-added tax (VAT) rate from 10% to 12 percent.
IBON estimates that higher prices pushed the February daily cost of living for a family of six in the National Capital Region (NCR) to P665.01, more than double the daily minimum wage of P325. The national average daily cost of living is P544.80.
The implementation of the reformed VAT (RVAT) law in November last year also had an alarming effect on people’s spending, hindering economic growth. Despite the surge of remittances in the last two months of the year as overseas Filipino workers (OFWs) sent money home to their families for the Christmas festivities, consumption grew by only 5.2%, substantially less than the 5.7% recorded in the same period last year.
Full-year growth in consumption also slowed to 4.9% from 5.8% in 2004. This helped pull down the full-year 2005 growth of the gross domestic product (GDP) to 5.1% from 6% in 2004.
Government hopes to earn an estimated P97 to P105 billion in additional revenues in 2006 from implementation of the RVAT law, much of which will be used to service the country’s debts and improve the country’s creditworthiness. But despite government claims that RVAT will benefit the people, the tax only means higher prices, and drastic cuts in people’s disposable income, consumption and welfare. (end)