Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.

Business Economics Assignment # 4 5:00pm to 8:00pm

ON GAS PRICES AND LEVIED TAXES

Due to availability of data, I would base my arguments on data obtained from U.S. statistics. It is
observable from the illustration (EIA, 2018) below, that gas prices are affected by NPDs
discussed in class and the handouts provided online. The final price basis for gas can broken
down in percentages and respective to the image below: (a) Supply ​NPD:​ Technology (11%),
(b) Supply ​NPD​: Cost Of The Factors Of Production, (c) Supply ​NPD​: Taxes (18%) And (d)
Supply ​NPD​: Complementary Goods: Crude Oil (57%).

From this breakdown alone, we can answer the question above. SUPPLY NPD: TAXES (18%)
determinant is only 18% of the equation of gas pricing. It is a huge effect, but it is not the major
determinant of price. The biggest effect in our list is Supply ​NPD​: Complementary Goods: Crude
Oil (57%). We can say that the effects we are seeing in the news on gas prices, ​may be as a
result of another NPD (e.g. Crude Oil price changes - NPD: Complementary good)

EIA April 2018 Data: ​https://www.eia.gov/energyexplained/index.php?page=gasoline_factors_affecting_prices

(inverse relationship for taxes = the more taxes levied on suppliers

SUPPLY NPD: increase, the supply/output of the good decrease) (direct
TAXES/SUBSIDIARIES relationship for subsidies = the more subsidies increase, the
supply/output of the good increase)

Source: https://gaspricesexplained.com/#/?section=gasoline-taxes-by-state
According to DOE, as of 2nd half of 2018, 83,621 MB (thousand barrels * ​159 litres​) [SOURCE:
https://www.doe.gov.ph/downstream-oil]. A news by inquirer estimated gas prices around
November 2018 to be about P57.85 per litter (averaged).
[https://business.inquirer.net/260396/fuel-prices-in-ph-among-highest-in-region?utm_expid=.Xq
NwTug2W6nwDVUSgFJXed.1]

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Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.
Business Economics Assignment # 4 5:00pm to 8:00pm

With an assumption that this is the equilibrium price, since it prevailed in the market, below
graphical presentation: (assumption of 2% increments in Price, and 30% increments in Quantity)

Commodity Commodity
COMMODITY UNIT
Surplus (+) Shortage (-)
Excess
GAS Excess Demand LITERS
Supply
PRODUCERS CONSUMERS
Quantity Quantity Surplus (+) or
Prices
Supplied Demanded Shortage (-)
(liters) (liters)
6,725,269 63.78 23,195,315.91 16470046.8
9,607,527 60.74 17,842,550.70 8235023.4
13,725,039 57.85 13,725,039 0.0
17,842,551 54.96 9,607,527.30 -8235023.4
23,195,316 52.21 6,725,269.11 -16470046.8

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Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.
Business Economics Assignment # 4 5:00pm to 8:00pm

ON VEGETABLES AND RAINY SEASON

Dates and time frame, may increase or decrease the demand for a
DEMAND NPD: SEASONALITY
good.

In report by Manila Times (2018), the Benguet governor disclosed: “The high prices of
vegetables in the market, especially in Metro Manila, are not caused by shortage of supply”.
Further he blamed the rising of prices in damaged roads caused by the rainy season.

SOURCE: https://www.manilatimes.net/benguet-gov-explains-rising-vegetable-prices/439657/

Thus, based on the question, we can say that seasonality could have caused the curve to shift
to a higher supply causing lower prices, yes. Yet, due to additional costs of transportation
resulting from damage roads, the price is affected. We can say that poor infrastructures in the
country is somehow affecting the prices of our vegetables.

Further, aside from roads, certain strong rains may also cause damage to the crops. This would
result in loses in supply and skyrocketing of prices.

PSE 12/292018 vegetable prices:

PSE 01/05/2019 vegetable prices:

LATEST:

SOURCE:
https://psa.gov.ph/content/psa-media-service-market-prices-selected-commodities-metro-manila

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Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.
Business Economics Assignment # 4 5:00pm to 8:00pm

For sample graph on tomatoes: with an assumption that the equilibrium price is Php35 (last
recorded price on 2018), since it has prevailed in the market, below graphical presentation:
(assumption of 2% increments in Price, and 30% increments in Quantity). With 2018 estimated
​ 8300000 kg
at: 2

SOURCE: https://psa.gov.ph/vegetable-root-crops-main/tomato

Commodity Commodity
COMMODITY UNIT
Surplus (+) Shortage (-)
Excess
TOMATOES Excess Demand KG
Supply
PRODUCERS CONSUMERS
Surplus (+) or
Quantity Prices Quantity Shortage (-)
Supplied (kg) Demanded (kg)
13,867,000 38.59 47,827,000.00 33960000.0
19,810,000 36.75 36,790,000.00 16980000.0
28,300,000 35.00 28,300,000 0.0
36,790,000 33.25 19,810,000.00 -16980000.0
47,827,000 31.59 13,867,000.00 -33960000.0

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Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.
Business Economics Assignment # 4 5:00pm to 8:00pm

On Sin Taxes and the Poor

(inverse relationship for taxes = the more taxes levied on suppliers

SUPPLY NPD: increase, the supply/output of the good decrease) (direct
TAXES/SUBSIDIARIES relationship for subsidies = the more subsidies increase, the
supply/output of the good increase)

According to REPUBLIC ACT NO. 10351 (2012), known as Sin Tax Reform Law, it ​levied by
government in the following ways:

(SOURCE: https://www.lawphil.net/statutes/repacts/ra2012/ra_10351_2012.html)

I. Section 141. Distilled Spirits.

(a) Effective on January 1, 2013

(1) An ad valorem tax equivalent to fifteen percent (15%) of the net retail price
(excluding the excise tax and the value-added tax) per proof; and

(2) In addition to the ad valorem tax herein imposed, a specific tax of Twenty
pesos (P20.00) per proof liter.

(b) Effective on January 1, 2015

(1) An ad valorem tax equivalent to twenty percent (20%) of the net retail price
(excluding the excise tax and the value-added tax) per proof; and

(2) In addition to the ad valorem tax herein imposed, a specific tax of Twenty
pesos (P20.00) per proof liter.

(c) In addition to the ad valorem tax herein imposed, the specific tax rate of
Twenty pesos (P20.00) imposed under this Section shall be increased by four
percent (4%) every year thereafter effective on January 1, 2016, through revenue
regulations issued by the Secretary of Finance.

II. Section 145. Cigars and Cigarettes.

(A) Cigars. – There shall be levied, assessed and collected on cigars an excise
tax in accordance with the following schedule:

(1) Effective on January 1, 2013

(a) An ad valorem tax equivalent to twenty percent (20%) of the net retail price
(excluding the excise tax and the value-added tax) per cigar; and

(b) In addition to the ad valorem tax herein imposed, a specific tax of Five pesos
(P5.00) per cigar.

(2) In addition to the ad valorem tax herein imposed, the specific tax rate of Five
pesos (P5.00) imposed under this subsection shall be increased by four percent
(4%) effective on January 1, 2014 through revenue regulations issued by the
Secretary of Finance.

(B) Cigarettes Packed by Hand. - There shall be levied, assessed and collected
on cigarettes packed by hand an excise tax based on the following schedules:

Effective on January 1, 2013, Twelve pesos (P12.00) per pack;

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Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.
Business Economics Assignment # 4 5:00pm to 8:00pm

Effective on January 1, 2014, Fifteen pesos (P15.00) per pack;

Effective on January 1, 2015, Eighteen pesos (P18.00) per pack;

Effective on January 1, 2016, Twenty-one pesos (P21.00) per pack; and

Effective on January 1, 2017, Thirty pesos (P30.00) per pack.

The rates of tax imposed under this subsection shall be increased by four percent
(4%) every year* effective on January 1, 2018, through revenue regulations
issued by the Secretary of Finance.

The Republic Act 10351 (Sin Tax Reform Law) has the following goals according to DOF:

SOURCE: https://www.dof.gov.ph/index.php/advocacies/sin-tax-reform/

a. finance the Universal Health Care program of the government

b. facilitate the 4 Ps program
c. simplify the current excise tax system on alcohol and tobacco products and fixed long
standing structural weaknesses
d. address public health issues relating to alcohol and tobacco consumption.

According to WHO (2015), “Within the first year, they ​(me: Philippines) ​raised more than
USD$1.2 billion and allowed the Philippines to provide healthcare to an additional 14 million
families or roughly 45 million Filipinos.”

Further WHO (2015) explained that these levied taxes “provided a new injection of funding that
enabled the Philippine Government to enrol more people in universal health care and scale-up
NCD prevention services in primary care.”

SOURCE: https://www.who.int/features/2015/ncd-philippines/en/

The root of the problem at some argument point are the selfish capitalists. It was discussed in
class how corporate social responsibility is caring about the Earth, by Earth, including humans.
If the goal in the first place is to help the marginal community, how can recharging it back to the
marginal community be socially responsible? Though, it is impartial to create different packs for
the poor vs the rich, right? Or, should we suggest that the poor be given discounts over the rich.
But won’t that encourage the poor to buy cigarettes more? So by solving the benefits, we go
back to the problem it solved in the first place - health issues.

The worst thing about all this is we are all bystanders. The decision-making are made by the
clowns of the Senate and Congress. These laws are not even academically researched for the
most efficient decision. Instead, by how politicians have been, it has the tendency to be based
on personal agenda.

We can say as WHO (2015) pointed out that Sin Tax did help the deficiency in funding that the
universal health care needed. We can try to assume that due to the pricing, lesser sticks are
consumed by the poor communities. Although the demand recorded may be majority poor, due
to this hike in price and the law of demand, the Qd among the poor communities must have
decreased after the price hike. But to not commit the same mistake politicians make, I would
endeavor to someday double check through survey and statistics the actual digits governing
these assumptions. A good thesis topic in the future.

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Marva, Johans Bill D.​ (Student #18125832) ​ Prof. Ramse C. Osano, Jr.
Business Economics Assignment # 4 5:00pm to 8:00pm

TOBACCO PRODUCTION: 1100 METRIC TONS

SOURCE: ​https://psa.gov.ph/non-food/tobacco
TOBACCO PRICE: PHP 73.46
SOURCE: http://countrystat.psa.gov.ph/?cont=10&pageid=1&ma=J50PRFPC

For sample graph on tobacco: with an assumption that the equilibrium price is Php73.46 (last
recorded price), since it has prevailed in the market, below graphical presentation: (assumption
of 2% increments in Price, and 30% increments in Quantity). With 2018 estimated at: 1100
metric tons

Commodity Commodity
COMMODITY UNIT
Surplus (+) Shortage (-)
Excess
TOBACCO Excess Demand METRIC TONS
Supply
PRODUCERS CONSUMERS
Quantity Quantity Surplus (+) or
Prices
Supplied Demanded Shortage (-)
(metric tons) (metric tons)
539 80.99 1,859.00 1320.0
770 77.13 1,430.00 660.0
1,100 73.46 1,100 0.0
1,430 69.79 770.00 -660.0
1,859 66.30 539.00 -1320.0