Tariff cut on 11 petrochem products good for gov’t — PPIA

The Philippines Plastics Industry Association (PPIA) claims that the government will be able to collect some P1.1 billion in revenues from the downstream petrochemical industries if the government finally goes ahead with the reduction of tariff on 11 petrochemical products which are the raw materials of the plastics industry.

Based on the PPIA’s computation, the government could collect P1.143 billion from the downstream petrochemical industries broken down as follows: P413 million from the collection of a five-percent tariff and 10- percent value-added tax on petrochemical resins; P45 million in withholding tax of plastics industry workers; P27 million in Social Security and Philhealth payments of industry workers; P152 million from the three-percent net VAT on gross sales; and P502 million from income taxes.

On the other hand, the PPIA assured, the government’s estimated loss from the reduction of the current 10-percent tariff on the 11 petrochemical products to the mandated five percent ASEAN Common Effective Preferential Tariff (CEPT) would only be around P300 million.

Thus, with an expected P1.1 billion in additional tax revenue, the PPIA argued, the government would still have a net gain of almost P800 million.

Government, likewise, would be able to save the $3 million compensation that it must pay to Singapore for continuing to exclude the 11 petrochemical products from the mandated zero to five percent average tariff rates under the ASEAN-CEPT scheme.

The PPIA pointed out that the plastics manufacturing industry is very labor-intensive compared to the petrochemical industry which is technical and mechanized.

The plastics industry directly employs 106,134 workers in plants that convert the resins to plastic products.

However, including allied industries and suppliers, the employment figure would easily reach 500,000, the PPIA estimated.

The plastics industry, the PPIA disclosed, last year had experienced a severe contraction of 23 percent due to the continued maintenance of the 10 percent tariff cover on the 11 petrochemical products.

From the 2003 consumption of 723,063 metric tons (MT) of plastic resins specifically polyethylene, polypropylene, poly-vinyl chloride and polystyrene, the PPIA said, its consumption in 2004 dropped to 556,661 MT as resin prices also increased, following the upward price trend of crude oil in the global market.

Plastic polymers are a by-product of crude oil refining, with the naphtha cracker producing the resins needed as raw materials for plastic manufacturing.

With the lack of raw materials, the PPIA said, the plastics manufacturers stopped production.

Unable to meet the continued demand for plastic products, the PPIA narrated, the door was opened for imported plastic products to meet domestic demand, thus aggravating the problem of the local plastic manufacturing industry.