of Philippine Development NumberJournal Twenty-Four, Volume XIV, No. 1, 1987
INDIRECT TAX REFORM IN THE PHILIPPINES: A COMPLEMENTARY MEASURE TO THE TARIFF REFORM PROGRAM, 1979-1985
Rosorto G. Monasan
I.
Introduction
A restructuring of the domestic tax system is viewed by many sectorsas a necessarycomplement to the ongoingprogramsof tariff reform and import liberalization. This perception is basedon (1) the protective nature of internal indirect taxes in the Philippines,i.e., the indirect tax system has been one of the instruments usedto protect domestic industries; (2) a concern that the reduction of. peak tariff rates on nonessentialconsumption goods may induce greater consumption/importation of the same and, consequently, adversely affect the trade account; and (3) the possibility that the tariff reform program may result in lower tax revenuesat least in the short run, and therefore a strong revenue performance of domestic taxes might be called especiallyduring the initial phaseof the restructuring. The primary objective of this study is to analyze how domestic indirect taxes interact with the tariff system to affect the market for particular goods and, consequently, their effective protection rates. The revenue and equity implications of alternative indirect tax schemeswill alsobe examined. 2. The Protective Nature of Domestic Indirect Taxes in the Philippines The purpose of this section is to describe the main features of the indirect tax system so that the protective effect of these taxes can be identified. There are two major types of internal commodity taxes in the Philippines: the specific and the salestax. The specific tax is a tax assessedasa givenamount per unit of product. It applies Research Fellow,PhilippineInstitutefor Development Studies' (PIDS). 29
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to selectedarticles notablytobacco,alcoholic and petroleumproducts.The sales.taxisa taxassessed on an ad valorembasis, i.e., asa percentageof the priceof the product.Itapplies to most products not subjectto thespecific tax.The salestaxmay be differentiated intermsof origin oftheproducton whichitislevied. The localSales tax applies to domestically producedgoods.The advancesalestax appliesto importedgoods thataresubjectedto furtherprocessing and/orthosethatareresold. The compensatingtaxapplies to imported goodsforpersonalusewhichdo notform partofothergoodsfor sale,e.g.,importedcapital equipment.The specific taxon domestically-produced goodsand thelocal salestaxarepaidby themanufacturer, whiletheadvancesalestaxand thecompensatingtaxarepaid by theimporter. The protective effectof thePhilippine indirecttax systemisdue to one,or a combinationof some,of thefollowing features of the system: (I)timing of tax payments for imported and domesticallyproducedgoods; (2)different tax ratesfor importedand domestically-produced goods; (3) the valuation of the tax base of imported and domestically: produced good; (4) the mark up that applies to the tax base of imported goods; and (5) the extent to which tax credits can be availed of. The local salestax is payable within 20 days after the end of each quarter while the advance sales tax and the compensating tax, i.e_, the sales tax on imported goods, are payable upon releasefrom customs custody. The specific tax on domestic products is payable upon .the removal of the .product from its place of production while the specific tax on imported articles is payable before the release of. said articles from the .customs warehouse. Thus, the timing of the payments of the domestic indirect taxes induces additional cost (specifically interest cost) to be borne by the importer/traders and eventually by the users/consumers of imported goods. Payments of taxes on domestically-produced goods beCome due after these goods have been sold and presumably after the same have been paid for (price plus tax). For imported goods, the advance sales, compensating or specific tax are paid before these goods are sold.
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TAX REFORM
31
Sales tax rates vary according to the "essentiality" of the commodities on which they are levied. Non-essential and Semi-essential articles are taxed at 50 and 30 percent, respectively. So-called ordinary commodities are subject to a 20 percent sales tax rate while essentialsare taxed at 10 percent.1 Agricultural products are levied a 0 percent tax. Locally-manufactured automobiles are taxed at 15,45 percent depending on price while imported automobiles are taxed.at 100-200 percent. Prior to October 1985 when Presidential Decree (PD) 1991 was promulgated, the multi-pronged rate structure described above was further complicated by the imposition of lower salestax rates on locally-manufactured versions of certain goods relative to their imported counterparts.. For instance, imports of certain semi-essential and essential articles such aspens,ballpens, chairs, sofas,beds,showcases, bookcases, watches, clocks, electric fans and exhaust fans, electric, gas,and oil stovesand ranges,phonographsand tape recorders, televisior_s, refrigerators and freezers, agricultural products, processedmeat, mi_lk, fish, wheat flour, manufactured medicines, soap and detergentsj writing pads, notebooks, etc., were subjected to higher sales tax rates than the domestically-produced articles. Similarly, for products subject to specific tax, the unit tax on the imported article was higher than that on the-locally-manufactured version. Other things being equal, a higher tax ra_e on .imported goods relative to those equivalent goods produced domestically has t_hesameprotective effect asa tariff on the said goods. However, varioustax measureswere introduced since1983 which were aimed at unifying the specific and the salestax rates on imported and domestic goods, Executive Order 924 (November 1983) unified specific _taxes on imported and locally-manufactured cigarettes in the highest bracket. Executive Order 928 (December 1983) unified specific taxes on imported and domestically-produced fermented liquors. Executive Order 947 (june 1984) unified specific taxes on imported and locally-produced distilled spirits and wines. Presidential Decree (PD) 1991 (October 1985) unified the sales tax rateson semi-essentialand essentialarticles. Thus, at present the sales tax rates on all imported and domestic goods are equal, with the I
1. Between 1969 and 1977, non-essential,semi-essential,ordinary and essentialgoodsweretaxedrespectivelyat70, 40, 7 and5 percent.From1978 to 1985,the ratestructurewas50, 25, 10 and5 percentbasedon"essentiality.",
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sole exception of those on automobiles. The base of the local sales tax is gross selling price while that of the advance sales tax is the tariff inclusive of landed cost (i.e., home consumption value (HCV) plus 10 percent of HCV plus postage commission and other charges except freight and insurance) plus a markup and that of the compensating tax is the tariff inclusive of landed cost only. The markup for advance sales tax purposes is uniformly set at 25 percent. 2 The present valuation practice to the tax base would have no protective effect if the importer-middlemen and the factory gate were comparable stagesin the distribution process and if the legal markup represents an accurate estimate of the importer-middlemen's profit margin. The assumption here is that, most buyers (final as well as intermediate consumers) do not import directly but instead get their import requirements through middlemen, while the same buyers purchase domestically-manufactured goods directly from factories. This would then justify the addition of the markup in the sales tax baseof imported goods, since, if no markup were applied, the ratio of the advance sales tax to the value of the imported product paid to the importer (i.e., tariff inclusive of landed cost plus trader's margin) would be lower than the tax rate applying to the gross value of the locally-produced good. If this argument holds, then the compensating tax which does not include the markup in its base would result in a lower effective tax rate than the local salestax. At this point, it is not at all clear that the importer-middlemen and the factory are, in fact, the competing sources of supply. One could just as easily argue that most buyers do not purchase their goods directly from the factory but rather indirectly through traders. If this is true, then the markup provision does not appear to be justified as it introduces some element of protection for goods subject to the advance sales tax but not for those subject to compensating tax. Percentage and specific taxes paid on inputs into locally-manufactured goods subject to the sales tax may be credited against the sales tax liability. Goods subject to specific taxes may not avail of the tax credit provision on taxes on inputs. However, materials used 2. Before ExecutiveOrder 883 (March1983) the markup was 25, 50 and 100 percent,respectively,for ordinaryessential,semi-essential and nonessentialarticles.
MANASAN: 1 NDIRECT
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TAX REFORM
in the manufacture of articles subject to specific tax and imported by the manufacturer are not subject to either the advanced salestax or the compensating tax. In caseswhere tax credit for taxes on inputs is possible/available(i.e., goodssubjectto salestax), the protective effect of the indirect tax system would result from the rate and markup provision and the additional interest cost arising from the time lag between purchaseof input and the availment of tax credits as well as the timing of the payments of the advance salestax on the output. In caseswhere no tax credit provision applies (i.e., goods subject to specific taxes), the protective effect results from the differential rate provisions, the capital holding costs due to early payment of taxes on imports of the output, and the uneven treatment of imported and locally-manufactured inputs with regard to the applicability of the salestax. 3. Theoretical Framework In this section, a theoretical framework and methodology that may be used to quantify the protective effect of indirect taxes is presented. The usual partial equilibrium assumptions of protection theory as laid out in the works of Corden (1966), Balassa(1965) and others are made, namely: (1) infinitely elastic foreign supplies of importables; (2) infinitely elastic foreign demand for the country's exports; (3) zero elasticity of substitution among inputs; (4) constant returns to scale in production; (5) zero transportation costs; and (6) pure competition. In contrast to the nominal protection rate which measuresin relative terms the excessof the domestic price of a product over its border price, the effective protection rate (EPR) is defined as the percentage excess of domestic value added over free trade value added of a given activity resulting from the imposition of tariffs and other protective measures. Using the input-output relationship that would prevail under free trade conditions and assumingthat protection arisesfrom tariffs alone, the following may be derived:
i
(1)
EPRj = :
-1
1-
I
a/j
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or more simply,
tj
_
_ ¢lij. i
t ,_ i _
(2) EP%= 1 -
T,,aij i
where: j
refers to the output,
i
refers to the typical input,
t
is the free-trade value of input i used to produce a unit value of output j; and is the tariff rate on commodity i.
aq
Under a system of tariffs and salestaxes where the salestax rate on imported good i is smi and the salestax rate on domestic good i is sdi, the effective protection rate for commodity j is:
(1+%)(1+s%) -- _, aq (l+tl) (l+sml) i.
(1*s%) (3)
EPR.J =
.--1 I -_a.. t
/1
If the sales tax rate on imported good h. and that on domesticallyproduced good i is uniform, duces to: (l+t/)
-
i.e.,
if smk = sdk
= Sk, then (3) re-
1_ alj (l+t/)(1+sl) i
(4) EPR, =
- 1 1-
_aij I
The difference between (3) and (1) measures the degree of protection arising from the sales tax while the difference between (3) and (4) reflects the additional protection arising from the discriminatory provisions of the sales tax system, i.e., the protection due to the dif-
MANASAN: INDI RECT TAX.R E'FORM
35
ferential salestax rates.that apply on imported and domesticallyproducedgoods. Under a value added tax system that operates up to the manufacturer's level (such as the one-currently being enforced in the Philippines) wh6re salesand 'specific taxes actually paid on intermediate inputs usedare allowed astax credits againstsalestax due on the end product, EPR estimation should take account of the said tax credit on •inputs. Without the tax credit provision, and under the usual assumptions,the following relationshipholds: (5) Pdl = (l+t,)(!*sin)Pb, where: Pbi isthe border price of good i, Pd/is the domestic price of good i inclusiveof the domestic sales tax or grossdomestic price. This implies that the gross domestic price is just equal to the price of importing a similar good which is equal to the border price inflated by the tariff and the sales tax on imports. If tax credits for taxes paid on both domestic and imported purchasesare allowed and if the said credit is obtained immediately and costlessly,then the net domestic price of intermediate• products to the intermediate user should just equal the price of importing a similar good net of the tax credit_i.e., Pet. (6)
' 1 +sd.I
-
(l+ti)
Pbi. 3J
.j
3. Note that the grosspriceof the imported input is Pb (1 + ti) (1 + smi) and the tax crediton importedinputsis.srn(1 + ti)Pb i. Thus,thepricenet of the tax credit,i.e.,the effectivepriceto theintermediateuser,is: (l+ti) (1+sini) t_oi- smI (1+ti) Pbi = (1+ti) PEr ,Similarly, the grossprice of the domesticinput is Pd while the tax credit is PdI domesticinputsissdi thetax creditis Pd/-
I + sdi sd i --
. Hence,the priceof thedomesticinput net of Pdi Pdi
1 +sdt
-
1 +sdi
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Thus, the net price to the buyer of either the domestic or the imported input must be equal to Pb. (1 + ti). This means that the gross domestic price of the input, Pd;, is equal to Pbi (1 + ti) (1 +sdi). Thus, the sales tax on imports, srni, has no influence on the domestic price of inputs. The highest price which the seller of the domestic good can charge is the net price to the buyer plus the domestic sales tax which the buyer/user of the input can take as a credit. The gross price of the imported input is Pbi (1 + ti) (1 + srni) which is not equal to the gross domestic price ofsrn i --/=sdr Accounting for the tax credit for inputs as provided in the value added system, the effective protection formula for final goods is modified as follows:
(1+ยง)(1+s%)_ - s % (1.t;) (7a) EPR. = ;
(l+sdj)
- 1
1 -_a /
On the other hand, the effective goods is reduced to:
(7b)EP%=
(l+tj)
-- _i a,. tJ (l*ti) 1 -- I;a.. i
/J
protection
rate of intermediate
.--1
I]
If it is now assumed that a uniform or nondiscriminatory value added tax system exists, i.e., a scheme where sin: = sd.J and credits for taxes on inputs are allowed, then the effectiJve protection rate for intermediate and final goods may be represented by equation (7b) above. Equations (1) and (7b) are identical. This implies that a nondiscriminatory value added tax system has no protective effect on both intermediate and final goods under the full tax credit system
MANASAN:
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TAX REFORM
37
where tax credit is obtained immediately and costlessly. Furthermore, a discriminatory value added tax system has no protective effect in the case of intermediate goods. Equations (Ta) and (Tb) above abstract from the additional capital holding costs arising from the advanced payment of the sales tax on imported inputs. It was pointed out earlier that the sales tax liability for domestically-produced goods is incurred twenty days after the end of the quarter in which the sale has taken place (sales receipt usually occurs within this period also) while sales taxes on imported inputs must be paid before their release from customs. This practice has resulted in an increase in working capital requirements. Taking the interest costs of this additional working capital into consideration, the effective protection rate formula for final goods becomes:
(l+t.) [1+s%(l+r)] _
,(Sa) EPR.-
--
(l+sd/) --.
_
(lij
(l+ti)[l+r(smi)
]
i 1 -_a i
ii
where r is the relevantinterestrate needed to take account of the timing difference, e.g., if the annual market interest rate is 20 t_ercent and the maximum timing difference is 3 months, then r should be 5 percent. 4-/On the other hand, the effective protection rate of intermediate goods is given by the following: 4. If capital holding cost is not ignored, then the net domestic price of intermediate goodsshould' just equal the price of importing a similar good inclusiveof the capital costsbut net of the tax credit, i.e., Pal. i = (l+ti)
[l+r (smi) ] Pbi
1+sd / Note that the grossprice of the imported input with capital costsinto account is Pbi (1 + ti) [ 1 + smi (1+r)] and the tax credit issml (1+tl) Pbr This yields a price,. net of the credit equal to:
(l+ti) [l+sm i (l+r)]Pbl-Smi(l+t/)
Phi =- (l+tl)[l+r
(sml) ] Pbi = Pdi 1+sdi
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(1+%)[l+r(smj)]- :o;j (1%)[l+r(smi)] (8b) EPR. -
/
-
1
I -- ._a/j
J
I
Now, if a nondiscriminatory value added tax system is assumed, then (ga) is revised as follows: (l+tj) (9)
EPR. J
----
[i+s(l+r)] -- :_a.. (l+ti)(l+rsi) J ':
(l+s) 1 -
--
1
Za.. • I./ i
However, (8b) remains unchanged. The analysis shows that (1) a value added tax system that treats imports and locally-produced goods uniformly has no protective effect if one abstracts from capital holding costs; (2) in the. case of intermediate goods, a discriminatory value added tax system has no protective effect regardlessof the inclusion or noninclusion of capital holding costs; (3) in the case of final goods, a discriminatory value added tax scheme may have some of the inclusion of capital holding COSTS.
In summary, to evaluate the protective effect of the discriminatory elements of the indirect tax system one may proceed in three stages, namely: (1) estimate EPRs taking into account both tariffs and domestic indirect taxes with one and/or a combination of its various discriminatory elements;. (2) estimate EPRs taking into account both tariffs and domestic indirect taxes under the assumption that smi = sd/for all i's; and (3) take the difference between the said estimates. 4.
Methodology and Data Three setsof effective protection rates (EPRs) were estimated: (1) EPR using tariff and •specific/salestax rates for 1979; (2) EPRs using tariff rates for 1985 and sales/specifictax ratesfor 1985 prior to the implementation of PD 1991; and (3) EPRs using tariff rates for. 1985 and sales/specific tax rates for 1985 as revisedby PD 1991. The tariff rates were obtained from the Tariff and Customs Code. The specific/salestax rates were taken from the National Internal Revenue Code. The input-output relationship used to compute the
MANASAN:
INDIRECT
TAX
REFORM
39
EPRs are based on the 79 x 79 input-output (I-O) tables for 1979 from the National Census and Statistics Office (NCSO). The 1979 I,O tables yield domestic value coefficients that were converted to free trade coefficients by tariff estimates for the same year .ascomputed by Quintos (1986). Two alternative values of the advance sales tax rate were used in the estimation of EPR. The first one excludes the markup while the second includes the markup which is equal to 25 percent of the tariff-inclusive landed cost of the product in 1985 and equal to 25, 50 and 100 percent in 1979 dependlng on the tax rate applicable. The implicit assumption in the latter is that the markup provision is a source of additional protection. Four different EPR estimates were computed for each set of EPRs. First, EPR was computed on the basis of equations (8a) and (8b) for final and intermediate goods, respectively. This is referred to as EPRI and it takes into account the differential rate provisions, if any, the tax credit provision, as well as the additional capital holding costs arising from advance payments of sales tax on imports, s Second, EPR was computed based on equations (7a) and (7b). This estimate is called EPR2 and it includes the protective effect of the differential rate provisions, if any, and the tax credit provision but it assumes that the tax credit for taxes on inputs is obtained immediately and costlessly and ignores the additional interest cost of advance payment of the salestax on imports on the output side. Third, EPR was computed on equation (7b) for both final and intermediate goods. This is called EPR3. This estimate assumesa nondiscriminatory value added tax system, i.e., smi = sdi and abstracts from the additional capital holding costs. Finally, EPR as defined in equation (3) was computed and referred to as EPR4. This estimate assumesa hypothetical situation where the relevant tariff and specific/sales tax rates._areOperativebut no tax credit isallowed for taxes on inputs. 'In all CaseS,nontradable inputs were treated as part of value added of the industry usingthem. Ideally, nontradable inputs:should be =decomposedinto value added, cost tradable inputs and cost of nontradable inputs. Tan (1979) compared the resultsfrom thesetwo alternative procedures and found that the deviations were "slight., 5. The interestratewasassumed to be 20 percentper annurifor 1979 and 1985after Presidential Decree(PD) 1991and30 percentannuallyfop1985 beforePresidential Decree(PD) 1991.
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In view of this, the former approach, which is computationally simpler, was adopted. The difference between EPR1 and EPR2 indicates the degree of protection attributable to the capital holding costs. The difference between EPR2 and EPR3 reflects the amount of protection due to the discriminatory internal indirect tax rates applicable on imports and on locally-produced goods. The difference between EPR2 and EPR4 measures the protection/disprotection arising from the adoption of the tax credit system. The different between EPRI (or EPR2 or EPR3 or EPR4) estimates using the two alternative advance sales tax rates (i.e., sm wth or without the markup) reflects the amount of protection attributable to the markup provision. 5.
Analysis
Tables 1-6 present the EPR estimates for 1979, 1985 before Presidential Decree (PD) 1991, and for 1985 after Presidential Decree (PD) 1991. For each year two sets of estimates were computed: the sin' estimates were based on the assumption that the markup provision in the advance sales tax is not a source of protection while the sm" estimates were based on the assumption that the markup provision yields additional protection. For all years considered, EPR1 is greater than EPR2 in most sectors. This implies that, for most goods, the difference in the timing of the tax payments for imported and domestically-produced goods is an additional source of protection. For final g_oods,the proportional difference between EPR1 and EPR2 centered around 3.47 percent (3.01 percent) in 1979, 3.09 percent(3.39 percent) in 1985 before Presidential Decree (PD) 1991 and 3.62 percent (4.0 percent) in i985 after Presidential Decree (PD) 1991 based on sm' estimates (sin" estimates). The estimates of the difference between EPR1 and EPR2 for intermediate goods are not very different from those of final goods. The difference between EPR2 and EPR3 is a measure of the amount of protection attributable to the discriminatory sales tax rates applicable on imports and on locally-manufactured goods. This difference is equal to zero in the case of intermediate goods. However, in the case of final goods those sm =/=sd, this difference in percentage terms averaged 117 percent in 1979, 47 percent in 1985 before Presidentral Decree (PD) 1991 and 0 percent in 1985
TABLE 1 EFFECTIVE PROTECTION RATES FOR SELECTED I-0 SECTORS, 1979 - (sin J)
z Z
Sector No.
Description
ti
sin'
sd
E P tsm _ a
R
1 Fsms b
E
P R Fsm'
2
, Ism' EPR3
EPR4 sin'
0 :D m
3 4 6 " 7 12
Corn Coconut incl: copra in farms Banana Other crops incl. agricultural services Commercial fishing
-.I1 --.17 -.14 .58 -.10
.I .1 .1 .1 .1
.01 .01 .01 .Ot .01
-.143529 -.196444 -.178802 .6128682 -.153423
-.030604 --.085329 -.060106 .8204952 -.032720
-.060390 -.114939 --.091462 3656811 -.064131
-.1478536 -.20t0002 -.1833952 .60486849 -.1576190
-,072056 -.120392 .102772 ,"452088 ,085t_'21
13 14 15 16 17 18 19 22
Fishponds and other fishery activities Forestry and logging Copper ore Gold and silver ore Ch rom ium Nickel Other metallic ores Rice and corn
-,i 0 -,28 .00 .00 .00 .00 .00 -. 11
.1 .1 0 0 0 0 0 .1
.0I .or 0 0 0 0 0 .01
-.123307 -.305623 -.033267 -.025935 -.034384 -.038363 -.026276 -. 132276
-.009970 -.213944 -.033267 -.025935 -.034384 -.038363 -.026276 -.008753
-.0398t 4 -.238143 -.032066 -.025051 -.033222 -.036877 -.025445 441737
-.1275971 -.3091512 -.0320664 -.0250507 -.0332223 -.0368772 -.0254445 -. 1374090
-.052530 -,247268 - .056086 -.042731 -.056467 -.066583 -.042080 -.046445
23 24 25
Sugar Milk and other dairy products Coconut oit
-.06 ,52 -.04
.02 .1 ,02
.02 .05 .02
-.067150 .8191967 .008632"l
-.067169 1.094667 .0085733
-.067850 .9901 l 16 .0074574
-.0678500 .80888089 ,00745735
-.073389 .8158365 -.028944
26 27 28 29 30
Cooking oil* Meat and meat products Flour and other grain mill products Animal feeds Other processed food
.50 .99 .29 .48 .43 .43
.1 ,1 .05 .05 ,1 .1
.1 .05 ,05 ,05 ,05 .1
- 5.14838 1.025433 .0521448 2.563486 .9548691 .9548691
-5.48234 1.179826 .083601 t 2.686070 1.241368 1,047527
-5.08969 ] .l 17017 ,0531270 2.550450 1.130939 .9424531
-5,089695 1.0154433 ,05312705 2.5504504 ,94245306 ,94245309
-4.83689 1.103519 .093555 2.316 | 16 .9834349 .7949489
*Negative
free
trade
value
-I > X -n m O -11
added.
4_
Table 1 (Continued) Sector No.
Description
32 33
Tobaccomanufactures Textiles and goodsexcluding wearingapparel
34
Wearingapparel and footwear
35
Lumber
36 37
Other wood Furniture andfixtures
38
Paperandpaper products
40 41 42
Leather and leather products Rubber and plastic products Drugsand pharmaceuticals
43
Industrial chemicals
44 45
Fertilizer Other chemical products
ti
sm "
sd
E P R 'lsm " o
1 Fsm " b
E P R 2 Fsm"
lsm" EP R3
EPR4 sin'
.92 .64 64
,0882 .1 .25
.0882 .1 .25
1.139904 .7957775 .8228312
1.I38428 .8802147 1.192551
1.131120 .7870224 .7870234
1.1311200 .78702242 .78702337
.9424235 .5964081 .5964091
-.02 -.02 .00
.1 .25 .01
.1 .25 .01
--. 191242 -.180505 .4872249
--. 157730 --.033768 .4977082
--. 194883 --.194883 .488"_593
-. I948829 -.1948829 .48815933
--.265231 -.265231 .4290579
.00 -.11 -. 11 -.11 .44
.01 .1 _25 .25 .1
,01 .1 .25 .1 .05
.0740869 --.306495
.0800165 --.307394
.0746060 -.314278
.07460596 -.314278
-.291657 .5388068
-.024118 .6803488
--.044492 .6738350
-.314278 .5315817
.0413647 -.356456 .356456 -.086669 .5196059
.44 -.27 .47 .18 .18 .1g .1l
.1 .25 .1 .1 .1 .5 .1
.1 .25 .! .05 .1 .5 .1
.5388068 -.514744 .5021777 .1689354 .1689354 .2082685 .1060658
.5374489 -.517372 .5006531 .2621183 .1680415 .1918796 .1052883
.5315817 -.523956 .4949353 .256756 _, .1631049 .1631046 .1000401
.5315817 -..523956 .4949353 .1631049 .1631049 .1631046 .1000401
.3773525 -.602592 .3043793 .1767002 .0830491 .0830487 .0495013
.17 .72 .72
.1 .1 .1
.1 .05 .1
.2094247 1.569248 _.569248
.2084638 1.784880 1.567179
.2033333 1.771133 "_.554417
.2033333 t .554417 1.554417
._,137729 1.61264I 1.395926
C "n Z rO -n -o _X r-_ -o m O m < m i'O "o m Z -I
46 47
Gasofine Dieseloi_
48 49 50 51 52 53 54 55 56
Fueloil Avttrrbo/gasotine LPG and others Cement Other nonmetallic mineralproducts Basic metals Fabricated metal products Machinery except electrical Electrica_ machinery and appliances
57 58
Transport equipment Miscellaneous manufactures
a/Intermediate good. b/Final good.
.23 .18 â&#x20AC;˘
.3 .1036
.3 .1036
.2498831 .1836810
:2455637 .1831051
.2312536 .1775812
.2312536 .t7758,12
.2294982 .| 7:68932
.17 .26 .15 --.01 .35 2.2 -56 .25 .18 .18 .18 .18 .t8
,1558 .12435 .0535 .05 .1 .1 .1 .1 .25 .5 2.5 .5 .5
.1558 .12435 .0535 .05 .1 .1 .1 -.1 .1 .1 25 .25 .5
.1816744 .2712272 .151 t060 -.120644 ,3950287 .2924623 1.264145 .2637413 .1358366 .1653416 .1358366 .1653416 .1653416
.1804341 .2703523 .1509496 -.120821 .3941530 .2909436 1.261923 .26275t 3 .4550238 1.018296 .t 299356 .6256151 .1456718
.1725202 .2633613 .1480418 --.120020 .4136721 .2848676 t .253262 .2577675 .4379420 .9743925 .1160733 .5881490 .1160736
.17:25202 .2633613 .1480418 -,120020 .4q36721 .2848676 1.253262 .2577675 .1160733 .t 160736 .| 160733 .1160736 .1160736
1715722 .2624511 .1477489 -.206955 3611039 .1026541 _9821405 .1594491 .2431163 .7795660 --.078753 .3933225 -.078753
.66 .15 .15 .15 .15
.1 .1 .25 2,5 .5
.1 .1 .1 .25 .5
.7873975 --.047224 --.033467 -.033467 -.010541
.7860712 --.048057 .2145560 -.038052 -.025825
.7786902 --.051915 .1981929 -.051914 -.051914
.7786902 -.051915 --.051914 --.051914 -.051914
.6610496 --.141500 .1086079 -.141499 --.141499
Z
Z.
,10 ill O -4 -4 X ::0 "n O :0
TABLE 2 EFFECTIVE PROTECTJONRATES FOR SELECTED 1-0 SECTORS,1979 - {sin _F) Sector No.
Description
ti
smn
sd
E P R I lsm_ia/ Fsmw_b:/
EPR2 Fsmp_
EPR2-1sm 'r EPIC,3
EPR4
3 _$ 6 7 12 13 14 1,5 16 17 18 19 22 23
Corn Coconut incl. copra in farms Banana Oiher crops incl. a_icultural services Commercial fishing Fishpondsandothec fishery activities Forestry and logging Copperore Gold andsil'verore Chromium Nickel Other metallic ores Riceand corn Sugar
-.11 -.I 7 -.I 4 .58 -.I 0 -.I 0 -.28 -.00 .00 .00 .00 .00 -.11 --.06
.125 .I 25 .I 25 ,I 25 .I 25 .I 25 .I :35 0 0 0 0 0 .125 .02
.01 .01 .01 .01 .01 .01 .01 0 0 0 0 0 ,01 .02
-.142443 --.195301 -.| 77643 .6148792 --.I 52176 --.I 22193 --.304659 --.033377 --.025051 -.033222 --.038232 -.026360 -.130967 -.067163
-,030745 --.085393 -.060236 .8202503 -.032784 -.010087 -.213976 -.033377 -.025051 -.033222 -.038232 -.026360 -.008786 -.067182
--.0360948 --.0910325 -.0659245 .81035127 --.0381624 -.0154298 -.2184190 -.0320664 --.0250507 -.0332223 -.0368772 -.0254445 -.0151619 -.0678500
-.1478536 -.2010002 -.I 833952 .60486849 -. 1576190 -,i 275971 --.3091512 -.0320664 --.0250507 -.0332223 -.0368772 -.0254445 -.1374090 -.0678500
-.050577 -.097781 -.079841 .7849816 --.060437 - 030494 --.228182 --.058273 -.026030 -.034539 -.070601 -.043748 -.020528 -.073648
24 25
Milk and other dairy products Coconut oil
.52 -.04
.125 .02
.05 .02
.8219464 .0083013
1.092660 ,0082426
1.0807270 ,00745735
.80888089 .00745735
.8664761 -.035559
26 27
cooking oit* Meat and meat products
.50 .99
.125 .125
.l .05
-5.16384 1.027988
-5.47996 1.179714
-5,413923 1.1678040
--5.089695 1.0154433
-5.11361 1.152061
28 29
Flour and other grain mill products Animal feeds
.29 .48
.0625 .0625
.05 .05
.0520013 2.567471
.0818697 2.683867
.08337350 2.6683194
.05312705 2.5504504
--.097934 2,389913
30
Other processedfood
32 33
Tobacco manufactures Textiles and goodsexcludingwearingapparel
34
Wearingapparel andfootwear
35 36 37
Lumber Other wood Furnitures and fixtures
.43 .43 .92 .64 .64 --.02 --.02 .00 .00 -.11 -.11 -.11
.125 125 .0882 .125 .375 .125 .375 ,0125 .0125 .125 .375 =375
.05 .1 .0882 .1 .25 ,1 .25 ,01 .01 .1 .25 .l
.9581603 .958I 603 1.139054 .7979664 .8430552 -,190290 -.172396 .4872750 .0740516 -.304526 -.279795 --.279795
_.239711 1.045871 1.137577 .8778948 1.190231 -.158568 --.034606 .4972532 .0796955 --.260685 --.08937t .2114407
1.225182] 1.0324123 1.1311200 .86900027 1.1477260 -.I623470 --.0517247 .49816255 .08026399 -.269314 --.1t 6435 .1803302
.94245306 .94245309 1.1311200 ,78702242 .78702337 -,1948829 -.1948829 .48815933 .07460596 -.314278 -.314278 -.314278
1.044546 8517767 .9254193 .6370026 .9157284 -.249444 -.138821 ,4299638 .0406060 --.321571 --.168692 1280730
C :O z _> TO m -o 1-_ -v Z m O' m < m rO m z "_
38
Paperand paperproducts
40 41
Leather and leather products Rubberandplasticproducts
42
Drugsand pharmaceuticals
43
Industrialchemicals
44 45
Fertilizer Other chemical products
46
Gasoline
47 48 49 50 51 52 53 54 55 56
Diesel oil Fueloil Avturbo/gasoline LPG and others Cement. Other nonmetallic mineral products Basicmetals Fabricatedmeta_products Machineryexcept electrical Electricalmachineryand appJiances
57 58
Transport equipment M_sceltaneous m_nufactures
.44 .44
.125 125
.05 .1
.5410494 .541 0494
.7535403 .6072457
.7449617 .5994753
.5315817 .53158t 7
5608966 4154102
-.27 .47
.375 .32,_
.25 .1
-.509096 .5041663
-.407888 .5784897
--.418804 .5711645
-.523956 .4949353
--.515933 3365214
.18 .38 â&#x20AC;˘18 ,T1
.325 .125 1 .125
.05 .1 .5 .3
.1704663 .1704663 .2565079 .1077005
.3103577 .2140460 .8792878 ,1456036
.3035816 .2078021 .8186623 ,1389150
.]631049 .1631049 .1631046 .100040|
.2049560 .1091764 .7200367 0783085
.17 .72 .72 .23
.125 .125 .125 .3
.1 .05 .1 .3
.2111757 1.573151 1.573151 .2498666
.2580173 1.896870 3.673998 .2455472
.2513759 1,.879491 1.657849 .2312536
.2033333 t.554417 1.554417 .2312536
.1439924 1.685295 1.463654 .2291671
.18 .17 .26 .15 --.01 .35 .22 .56 .25 .18 .t8 .18 .18 .18 ,66 .15 ,I 5 .15 .35
.1036 .1558 .12435 .0535 .0625 .125 .125 .125 .125 .375 .t .375 1 .1 .125 .125 .375 .375 |
.1036 .1558 .12435 .0535 .05 .1 .1 .1 .1 .1 .1 .25 .25 .5 .1 .I .I .25 .5
.}836739 .1816683 .2712727 .151 t023 -.119886 .4226860 .2946394 1.267083 .2653354 .1482914 .2220536 .3482914 .2220536 .2220536 .7896590 .0040367 .0269637 .0269637 .0842800
.1830980 .1804279 .2703978 .1509460 --.102376 .4653785 .3686751 i.375390 .3135976 .7343622 2.142542 .3754776 1.614676 .9695062 .8543166 .0446791 .4823676 .2034979 .6650849
.17758']2 .1725202 .2633613 .1490418 --.120020 .4136721 .2848676 1.253262 .2577675 .1160733 .1160736 .1160733 .1160736 .1160736 .7786902 --.051915 -.051914 -.051914 -.051914
.1767503 .1714483 .2622246 1476756 -.192682 .3969107 .1386005 1.029789 .1863794 .4653867 1.806510 .1113302 1.29t 519 .6620852 .6996454 --.121 !40 .2957057 .0205876 .448.5490
-_ Z _> o_ _> Z O :_ m C3 --t -I :_ Ă&#x2014; -n m -rt
4Negative free trade value added, at' Intermediate bt' Final good
good
.1775812 .1725202 .2633613 .1480418 --.t 02289 .4574592 .3608017 1.364347 .3072671 3061674 2.047291 .3521109 .1.532300 .9028659 .8450058 --.010230 .4066157 .1314976 .5594591
0 ::O
TABLE 3 EFFECTIVE PROTECTION RATES FOR SELECTED I-0 SECTORS, 1985 - (sin') Sector No.
E PR I ti
smt
sd
Ismt a/
Fsm' b/
EPR 2 Fsm'
EPR2-1sm J EPR3
EPR4 sin'
3 4 6 7 12 13 14 15 16 17 18 19 22 23 24
Corn Coconut incl. copra in farms Banana Other crops incl. agricultural services Commercialfishing Fishpondsand other fisheryactivities Forestryand Iogl_ng Copper ore GoJdand silver ore Chromium Nicket Other metallic ores Riceandcorn Sugar IMilkand other dairy products
-.01 -.I 5 -.02 ,43 .00 .00 -.20 .00 .00 .00 .00 .00 -.01 .00 .26
.01 .01 .01 .01 .01 .01, .01 0 0 0 0 0e .01 .02 .]
.01 .01 .01 .01 .01 .01 .01 0 0 0 0 0 .01 .02 .05
-.032566 -.I 78548 -.042397 .4541230 -.046881 -.014659 -.222096 -.034962 -025407 -030657 -.036980 -.025654 --.018185 -.006948 .35] 1890
-.032575 -.I 78555 -.042406 .4541109 -.046890 -.014667 -.222102 -.034962 - 025407 -.030657 -.036980 -.0256_4 -.018 ] 94 -.006979 .5005560
-.032555 -. 178902 -.042453 .4542651 -.046731 --.0_4541 -.222050 -.033137 -024079 -.028935 -.034752 -.024363 -.0] 8720 -.008075 ,4896370
-.0325550 -,I 789023 -.0424526 .45426508 -.0461313 -.0545408 -.2220497 -.033"_ 366 -.0240787 -.0289355 -.0347515 -.0243630 -.0_ 87204 -.0080752 ,33914124
-.043614 -.I 84048 -.0534l0 .4360597 -.06779] --.027057 -.231515 --.057475 --.041793 --.051896 - 064465 -.041039 -.023510 -.Of 3806 .3342299
25 26 27 28
Coconut oil Cooking oil* Meat and meat products Flour and other grain mill products
-.09 .40 .49 .29
.02 .5 ._ ,05
.02 ._ .05 .05
.0020576 -4.76602 5125218 .2962866
.00] 9740 -435695 .5881308 .2958329
.0004315 _4.68472 .5775787 .2959526
.00043| 55 --4.684719 .50139832 .29595260
-.034724 -4.43919 .5659138 .] 73370l
29 30
An imaJfeeds Other processedfood
32 33
Tobacco manufactures Textiles and goods excluding wearingapparel
34
Wearingapparel and footwear
35 36 37
Lu mber Other wood Furnitur_ and fixtures
.24 .21 .21 .42 .40 .40 -.02 -.02 -.04 -.04 -.24 -,24 -.24
.05 .5 .1 .0882 ,1 .25 .1 .25 01 .01 .1 .25 ,25
.05 ,05 .1 .0882 .1 .25 .1 .25 .0$ .01 .1 .25 .]
1.280733 ,4275839 .4275839 .4751445 ,5160570 5509010 -.123823 -. _07718 .3280309 .0143769 -.577134 -.498056 -.498056
1.279247 5856078 .4253042 .4735124 .5139452 .5392860 -._ 24799 -._ 13086 .3280021 ,0143606 -.578290 --.504415 -.269701
1,265552 ,5722216 .4130036 .4663068 .5054442 .5054432 -.129768 -.129768 .3295923 .0157517 -.526976 -.526976 -.295731
1.2655521 .41300363 .41300364 .46630680 .50544422 50544322 -.1297678 -.] 297677 ,32959229 ,015] 5107 -.526976 -.526976 -.526976
1.051739 .432267] 2730495 .3156544 ,3372145 .3372135 -.193666 -. 193666 .2699614 -.017126 -.565328 -.565328 -.334082
.I_ CII
C :::O Z > rO "11 -o -1r-_ m IJ m < m tO -o m
Z
38
Paperand paperproducts
40 41 42
Leather andleather products Rubberand plasticoroducts Drugsand pharmaceuticals
43 44 45
Industrial chemicals Fetifizer Otherchemicalproducts
46 47 48
Gasoline Dieseloi! Fueloi|
49 50 51 52 53 54 55 56
Avturbo/gasotine LPGand others Cement Other nonmetaJlicmineral products Basicmetals Fabricated metal products Machineryexcept electrical Electrica_machineryand appliances
57 58
Transportequipment Miscellaneousmanufactures
.41 .41
.1 .1
.05 .1
.5150711 .5150711
.6536430 .5130720
.6441014 .5044824
.5044824 .5044824
.4920843 .3524653
_ Z
--.24 .28 .18 .18 .18 .08 .! 7 .40 .40 .32 .29 .23
,25 .1 .1 .1 .5 .1 .1 .1 .1 .3 ,1036 ,1558
.25 .1 ,05 .1 .5 .1 .t .05 .I .3 .1036 .1558
-.381632 .3121930 .1839965 .1839965 .2429963 .0906295 .2278230 .8671168 .8671 t 68 째3472210 .2971104 ,2428297
-.385762 .3t01972 .2769452 .1826556 2184129 .0894912 .2263817 1.041185 .8646056 .3402964 .2961669 .2408810
-.396959 .3027888 .2688136 .1751625 .1751621 .0817845 .2185901 1.025716 .8503327 .3173443 .2871097 .2284450
-.396959 .3027888 .1751625 .1751625 .1751621 .0817845 .2185901 ,8503327 ,8503327 .3173443 .2871097 ,2284450
-.467995 .1354580 .1899339 ,0962828 .0962824 .0327725 .1303089 3812036 .7058202 .3156150 .2864427 .2274925
Z _ ..
.40 .13 -.01 .22 .15 .42 ,16 ,14 .14 .t4 .14
.12435 .0535 .05 .1 .1 .1 .1 .25 ,25 .35 ,5
.12435 ,0535 .05 .t .1 .1 .1 .1 ,25 .25 ,5
.4112041 .1337385 --.142294 .2488177 -.49530I .9996085 .1682118 ,1421529 .t 421529 ,I 592105 .1847969
.4097530 .1335079 --,142560 ,2476338 -.497446 .9965616 .t668321 .4484139 .1336242 ,3292176 ,1563676
.3981487 .1292170 --,141051 .2396421 -.500774 .9852931 .1599642 .4232230 ,1130853 ,2950328 ,1130853
.3981487 .1292170 --.141051 ,2396421 -.500774 .9852931 .1599642 .1130853 .1 _30853 .1130853 .1130853
.3972764 ._289443 -.232106 ,1883343 -.742400 .7292897 .0675792 .2422042 --.067933 .1140140 -.067933
._
._ .1 .t .25 .5
.6210707 --.022297 --.002783 --.002783 .0297404
,6192621 -.023479 .2307956 --.009288 .0080580
,6092939 -.029493 .2070418 -,029494 --,029494
.6092939 --.029493 -.029494 -.029494 -.029494
.5010544 -.107002 ,1295328 -.107003 -.t07003
.51 .08 ,08 .08 ,08
,1 .1 .25 .25 .5
;o tn o -I _> X =0 rn "n 0
=Negative freetradevaJue addee a/Intermediategood, b/FinaJgood
_1
TABLE 4 EFFECTIVE PROTECTION RATES FOR SELECTED 1-0 SECTORS, 1985 - (smm") Sector No
EPR Description
ti
sm"_
sd
Ismm"a/
1 Fsm" b/
EPR sin"
2-
sin" EPR3
EPR4 s131"
3
Com
-.01
.0125
.01
-.03256]
-.029872
-.0298555
-.0325550
-.043572
4 6
Coconutincl. coprainfarms Banana
--.15 --.02
.0125 .0125
.01 .01
-.178454 --.042365
-.1760o-0 -.039480
-.1764592 -.0395566
-.I789023 -.0424526
-.182817 -.053017
7 12 13 14 15 16 17 18 19 22
Othercropsinckagricultural services Commercialfishing Fishpondsand other fishery activities Forestry and logging Copper ore Gold and silverore Chrommiu 131 Nickel Other metallic ores Rice and corn
-.43 .00 .00 -.20 .00 .00 .00 .00 .00 -.01
.0125 ,0125 .0125 .0125 0 0 0 0 0 .0125
.01 01 01 .01 0 0 0 0 0 .01
.4541052 -.046745 -.014621 -.221974 -.0351 "_6 -.025539 -.028264 -,036801 -.025729 -.018009
,4581273 .043869 -.011922 -.219791 -.035116 -.025539 -.028264 -.036801 -.025729 -.015067
A5830233 -,0432446 - 0118315 -.2198581 -.0331366 -.0240787 -.0289355 -.0347515 -.0243630 -.0157676
.45426508 -.0461313 -.0145408 -.2220497 -.0331366 -.0240787 -,0289355 -.0347515 -.0243630 -.0187204
.4357825 -,066003 -.026589 -.229921 -.059528 -.043548 -.051859 -.068295 -.042580 -.021191
23 24 25 26 27 28 29 30
Sugar Milk and other dairy products Coconut oil Cooking oil* Meat and meat products Flour and other grain mill products Animal feeds Other processedfood
.00 .26 -.09 .40 .49 .29 .24 .21
.02 .125 .02 .'[25 .t25 .0625 ,0625 .t 25
.02 .05 .02 .1 .05 .05 .05 .05
-.006966 .3544718 .0011217 -4.78759 .51`53918 .2965321 1.285682 .4315273
-.006996 .5788044 .0010381 -5.07842 .6289482 .3262114 ] .382924 .6688616
-.0080752 .56488482 ,00043] 55 --4.986884 ,61566886 32619904 13646521 .65183062
-.0080752 33914124 .00043155 --4.684719 .50139832 .29595260 ] .265552] .41300363
-.014044 .374239I -.041415 -4.69655 .6022738 .1751320 1.112770 .4808664
32 33
Tobacco manufactures Textiles and goodsexcludingwearingapparel
.t 25 .0882 .125 .3125
.1 .0882 .1 .25
.4315273 .4740381 .5192046 .5627598
.5046681 ,4724060 .5869588 .703t 079
.48899405 .46630680 57583824 .66031001
.41300364 A6630680 50544422 50544322
.3180298 .3009025 .3721404 .4566122
34
• Wearingapparel & footwear
.21 .42 .40 .40
35
Lumber
-,02 -.02 -.04
,125 .3125 .01`25
.1 .25 .01
-.122271 -.102140 .3280994
-.090955 -.037271 .3376704
-.0972318 -.0581887 .33919932
-.t 297678 -.1297677 .32959226
-.176224 -.137181 .2707751
36 37
Other wood Furnitures and fixtures
-.04 -,24 -,24 -.24
,0125 .125 .3125 .3125
01 .1 .25 .t
.0I 43351 -.514636 -.490789 -.490789
.0197487 -.477541 -.4l 3948 -.166805
.02058502 -,488435 -.442186 -.199378
.01515107 -,526976 -.526976 -.526976
-.017737 -.535878 -.489629 -.246821`
¢0
C Z > tO m -o -r._ -Z 131 O Fn < 131 rO "a 131 Z -I
38
Paperand paper products
40 41 42
Leather and leather rproducts Rubber and plasticproducts Drugsand pharmaceuticals
43 44 45
Industrial chemicals Fertilizer Other chemical products
46 47 48
.4I
.125
.1
.5184066
.5825441
.571 ] 186
.5044824
.3902732
Gasoline Dieseloff Fueloil
-.24 .28 .18 .18 .18 .08 .17 .40 .40 .32 .29 .23
.3125 .125 .125 .125 .625 .I25 .125 .125 .125 .3 .1036 .1558
.25 .1 .05 .1 .5 .1 .1 ,05 .1 .3 .1036 .1558
--.377705 .3148236 .1863195 .1863t95 .2600694 .0930404 .2304878 .8716187 .8716187 ,3471971 .2971002 .2428208
--.327769 .3788560 .3259182 .2293405 .3932296 .1295595 .2767289 1.133050 .9521854 .3402726 .2961567 .2408721
-.341879 `3693160 .3156391 .2t98596 .3390515 .1197264 .2666327 1.113408 .9340384 .3173443 .2871097 .2284450
--.396959 .3027888 .1751625 .1751625 .1751621 .0817845 .2185901 .8503327 .8503327 .3173443 .2871097 .2284450
--.429413 .1638790 .2185660 .1227865 .2419784 .0611242 .I610372 .9368400 .7574706 .3152973 .2863070 .2273758
49 50 51 52 53
Avturbo/gasoline LPGand others Cement Other nonmetallic mineralproducts Basicmetals
.40 .13 -.01 .22 .15
.12435 .0535 .0625 .125 .125
.12435 .0535 .05 .1 .1
.4111878 .1337334 --.141097 .2515208 .1916621
.4097367 ,1335028 -.123698 .2895068 .2604809
.3981487 .1292170 -.123319 .2791081 -.429274
.3981487 .1292170 --.141051 .2396421 --.500774
.3970594 .1288762 -.217028 .2204286 .0381313
54 55 56
Fabricatedmetal products Machinery except electrical Electrical machinery and appliances
.42 .16 .14 .14 .14 .14
.t25 .125 .3125 .3125 .44 .625
.1 .1 .1 .25 .25 .5
i .003528 .1710312 .1496363 .1496363 .1713847 .2029412
1.101282 .2152956 .5841521 .2526925 .5020742 `3569332
] .086856 .2059532 .5524470 .2268025 .4587854 .3026139
.9852931 .1599642 .1130853 .1130853 .1130853 .1130853
.7713916 .0932477 `3290554 .0034109 .2353938 .0792223
57 58
Transport equipment Miscellaneousmanufactures â&#x20AC;˘
.51 .08 .08 .08 .08
.I 25 .125 .3125 `3125 .625
.1 .1 .1 .25 .5
.6274880 --.0204t2 .0039796 .0039796 .0446342
.6855142 ,0175319 `3353757 .0825784 .1620806
.6695808 .0099296 .3055982 .0572360 .1150558
.6092939 -.029493 -.029494 -.029494 -.029494
.5360980 -.085820 .2098485 --.038514 0193060
* Negati_
Z _0 -n m O -I X "n m -n O
free trade value added
a/' Intermediate b/Final
_' Z
good.
good.
.l_ qLO
TABLE 5 EFFECTIVE PROTECTION RATES FOR SELECTED t-0 SECTORS,1985 AFTER PD t991 (SMe) Sector No.
Description
_
sine
sd
E P R 1 IsrnS a_ Fsmf b/
OI O
E P R FsmJ
2 Jsmm EPR 3
EPR4 smf
3 4 6 7 12 13 14 15 16 17 18 19 22
Corn Coconutincl. copra in farms Banana Other crops incl. agricultural services Commezcial fishing Fishi_onds and other fisheryactZvities Forestryand logging Copperore Gold aod silver ore ChromJum N!ckei Other metallic ores Riceand corn
--.01 --.15 -.02 .43 .00 .OO -.20 .00 .00 .00 .00 .00 -.01
.OT .01 .01 .01 .01 .01 .01 0 0 0 0 0 .01
.01 .01 .01 .01 .01 .01 .01 0 0 0 0 0 .01
-.032483 -.178617 -.042244 .4568132 -.047119 --.014221 --.222042 --.034024 --.024230 -.027463 --.034486 --.024970 -.017878
-.032489 -.178622 --.042250 .4568051 -.047t25 --.014227 --.222046 -.034024 --.024230 -.027463 -.034486 --.024970 -.017884
-.032472 --.178851 --.042274 .4569172 --.046616 -.014126 -.222010 -.032793 -.023314 -,026206 -.032927 -.024127 -.018215
--.0324724 -.1788510 -.0422740 .4569T 717 -.0466162 --.0141261 --.2220098 --.0327933 --.0233136 -.0262058 -.0329272 -.0241267 -.0182145
-.043598 -_184038 -.053375 .4385054 -.068327 -.026974 --.231507 -.057407 -.041640 -.051351 --.064100 --.040991 --.023409
23 24 2.5 26 27 28 29 30
Sugar Milk and other dairy products Coconut oil Cooking oil* Meatarid meat products Flour and other grain mill products AnimaJfe_Ls Other processeclfood
.D0 .26 -.09 .40 .49 .22 .06 .21 .21
.02 .1 .02 .1 .1 .1 .2 .1 .2
.02 .1 .02 .1 .1 .1 .2 .1 .2
-.006999 .3482388 .0010585 -4.74036 .5089363 .1086683 .1828543 .4435017 .4602199
-.007019 .3468022 .0010028 -4.73431 .5082091 .1075776 .1710614 .4419819 .4546473
-.007737 .3402515 .000022 -4.68622 .5015255 ,1664614 ..1271991 .4346473 .4346477
-.0077367 .34025145 --.0000217 -4.686217 .50152550 .16646136 .12719909 .43464735 .43464767
-.013738 .1839564 -.035255 -4.43949 .4897589 .0037355 -. 174859 .2?73778 .2773781
32 33
Tobacco manufactures Textiles and goodsexcluding wearing apparel
34
Wearingapparei and footwear
35 36 37
Lumber Other wood Furniture and fixtures
.42 .26 .26 --.02 -.02 -.04 -.04 -.20 -.20
.0882 .2 .3 .2 .3 .01 .01 .2 .3
.0882 .2 .3 .2 .3 .01 .01 .2 .3
.4726384 .2899085 .3038465 -.083515 -.076357 .3295029 .0169324 -.418633 -.409730
.4715504 .2852625 .294197t â&#x20AC;˘ -.085901 -.081313 .3294837 .0169215 -.421601 -.415894
.4667649 .2735577 .2?35577 --.093172 --.093172 .3305837 .0175444 --.434202 --.434202
.46676491 .27355774 .2?355773 -.O93T 723 -.0931723 .33058371 .0t 754441 -.434202 -.434202
.3157461 .0430505 .0430506 --.186347 --.186347 -.2701594 -.O16648 -,478939 -.478939
c z 3_ rO -n -o -r -o m C_ Ill < m rO "o m z -I
38
Paperand paperproducts
40
Leather andleatherproducts
41 42
Rubber and plasticWoducts Drugsand pharmaceuticals
.41 .41
.1 ,2
.1 .2
.5154886 ,5301479
.5141559 .5252612
--0.7
.3
.3
-_432287
--.435927
.15 .18 .18
.2 .1 .2
,2 .1 .2
.0423631 .1826283 .1924530
.18 -.02 J)6 .40 .40 .32 .29 .23
.5 .2 .2 .I .2 .3 .1036 .1558
.5 .2 .2 .1 .2 .3 .1036 .1558
43 44 45
Industrial chemicals Fertilizer Other chemicalproducts
46 47 48
Gasoline Dieseloil Fue[ oil
49 50 51 52 53 54 55 56
Avturbo/gasotine LPC-and o_ers Cement Other nonmetallicmineralproducts Basicmetals Fabricatedmetal products Machineryexcept electrical Electricalmachineryandappliances
.40 ,13 -.16 .10 03 .28 .05 .19 .19 .t9
.12435 .0535 .2 .2 .2 .2 .2 .2 .3 .5
.12435 .0535 .2 .2 .2 .2 .2 .2 .3 .5
57 58
Transport equipment Miscellaneousmanufactures
.36 -.02 -.02 -.02
.2 .2 .3 .5
.2 .2 .3 .5
*_legatlve freetradevalueadded a/Intermediate good. b/Finalgood,
.5085939 ,.5085932
.5085939 .5085932
.3532875 .3532869
--,44440-3
--. AAAA .... 03
-.517542
(j_ _>
.0379723 .1817294 .189t 752
.0249811 .1767995 .i 767958
.0249811 .I 767995 .1767958
-.i 54279 .0966102 .0966065
_ Z
,2219530 -.071781 .0225474 .8644677 .8828842 .3373047 .2938059 .2380661
.2055641 -.074285 .0193766 .8627936 .8767458 .3326884 .2931769 .2367670
,! 767958 --.084322 .0079672 .8534052 .8534064 .3173888 .2871399 .2284778
.1767958 -.084322 ,0079672 .8534052 .8534064 .3173888 .2871399 .2284778
.0966065 --,134005 -,080926 .7064335 .7064347 .3156237 .2864487 .227499!
.4068887 .1322560 -.356251 .0843556 -,116837 .5693381 --.026587 .2647039 .2766442 .3005248
,4059213 ,1321022 -.3S0361 .0817508 -.121556 .5626350 --.029623 ,2607238 .2683779 .2806243
.3981866 .1292427 -.364354 .0715133 -.| 36459 .5420653 --.O40088 .2508354 .2508354 .2508354
.3981866 .1292427 -.364354 .0715133 -.136459 .5420653 -.040088 .2508354 .2508354 .2508354
,3972840 ,1289494 -.455497 .0157880 -.310300 .2831421 -.134312 .0505905 .0505905 .0505905
.3634803 -.182356 --.174550 --.158939
.3595014 -.184958 --.179954 -.171948
- 1.042e7 -.193723 -.193723 --.193723
--1.042e7 -.193723 -.I93723 -.193723
.2359980 -,278615 --.278615 -.278615
Z
O m -I _> x m "11 O ;g
TABLE 6 EFFECTIVE PROTECTION RATES FOR SELECTED I-0 SECTORS,AFTER PD 1991 -- (sin')
Sector No.
Description
ti
smn
sd
E P R 1 Ism# a/ Fsma b/
O1
E P R 2--1sin" Fsm'IEPR3
EPR4 srn"
3 4 6 7 12 13 14 ]5 16 17 18 19 22
Corn Coconutincl. copra in farms Banana Other cropsincl. agriculturalservices Commercialfishing Fishpondand other fishery activities Forestry and logging Copper ore Gold and silverore Chromium Nickel Other metallic ores Riceandcorn
-.01 -.15 --.02 .43 .00 .00 --.20 .00 .00 .00 .00 :00 -.01
.0125 .0125 .0125 .0125 .0125 .0125 .0125 0 0 0 0 0 .0125
.01 .01 .01 .01 01 01 .01 0 0 0 0 0 .01
-.032481 -.186965 --.042225 .4567991 --.047029 -.014201 -.221962 -.034130 -,024325 -.027634 -.034696 -.025049 .017766
-.029788 -.184528 -.039336 .4608322 --.044150 -.011498 -.219775 -.034130 -.024325 -.027634 -.034696 -.025049 -.014820
-.0297729 -.1764079 -.0393780 A6096035 --.0437308 -,0t 14|68 -.2198182 -.0327933 -.0233136 -.0262058 -.0329272 -.0241267 -.0124215
-.0324724 -.1788570 -.0422740 .45691717 -- 0466162 -.0141261 -.2220098 --.0327933 -- 0233136 -.0262058 -.0329272 -.0241267 -.0182146
-.043572 -.182817 -.0530_ 7 4381823 - 066552 --.026589 -.229921 --.059528 --.043548 -.054766 -.068295 -.042580 -.01835|
23 24 25 26 27 28 29 30
Sugar Milkand dairy product4 Coconut oil Cookingoil* Meat and meetproducts Ftourand other grain mill products Animalfeeds Otherprocessedfood
32 33
Tobacco manufactures Textile and goodsexcludingwearingapparel
34
Wearingapparel and footwear
.00 .26 -.09 .40 .49 .22 :06 .21 .21 .42 .26 â&#x20AC;˘26 --.02 --.02
.02 .125 .02 .125 .125 .125 .25 .I25 .25 .0882 .25 ,375 .25 .375
.02 .1 .02 .1 .1 ,1 .2 .1 .2 .0882 .2 .3 .2 .3
-.007015 ,3504t63 .0007503 -4.75472 .5108482 .1748632 .1975371 .4459142 .4668116 .4718962 .2943255 .3117480 -.081325 .072378
-.007035 .4204481 .0006946 -5.04933 .5462980 ,2280350 .4776186 .5200049 .5991616 .4708081 .4046681 .4605095 -.024658 .0040t 92
-.0077367 .41207896 -.0000217 -4.988382 .53788431 .22099662 .42202172 .51063775 .22567373 .46676491 ,38970788 .43438099 -.0301340 .11932800
-.0077367 .34025145 -.0000217 -4.686217 .50152550 .16646136 .] 2719909 43464735 .43464736 .46676491 .27355774 .27355773 -.0931723 --.0931723
-.014045 .2203230 --.041415 -4.69655 5243621 0890869 0598321 3180298 .033'0658 .3009025 ,1081628 .1528360 -.145722 .0037402
C z rO -n -o -1-o m C_ rn < rn rO "o rn
z .-I
35
Lumber
-.04
.OT25
.01
.3285478
.3381308
.340t 9076
.33058371
2707751
a_
36 37
Other wood Furnituresand fixtures
38
Paperaridpaper products
-.04 -,20 --.20 .41
.0125 .25 .375 .125
.01 .2 .3 .t
.0168807 -.414716 -A03587 .5176709
.0223011 --.344234 - 308565 .582641 3
.02297836 -.360011 --.331476 .5752303
.01754441 --.434202 -.434202 .5085939
.-.017737 -.4I 5438 -.386903 3902732
_Z _> ¢n 3_ z.
40
Leather and leatherproducts
.41 --.27
.25 .375
.2 .3
.5359951 -.429195
.6520534 -.373080
.6307590 --.383738
5085932 .444403
4458028 --.473900
41
Rubber andPlasticProducts
.15
.25
.2
.0468947
.1511761
.I347511
.02_981t
-.085598
42
Drugsand Pharmaceuticals
.I8 .18 •1"8 -.02 .06 ,40 .40 .32 .29 .23 .40 .13 .00 .22 ,15 .28 .05 .19 .19 .19 .36 -.02 -,02 -.02
.] 25 .1 .25 .2 .625 .5 .25 .2 .25 .2 ,125 .1 .25 .2 .3 .3 .1036 .1036 .1558 .1558 .12435.12435 .0535 .0535 .25 .2 .25 .2 .25 .2 .25 ,2 .25 .2 .25 .2 .375 .3 .625 .5 .25 .2 .25 .2 .375 .3 .625 .5
.1841555 .t 964469 .2333220 -.068513 .0264304 .8674383 .8904586 .3372883 .2937987 .2380600 .4068774 .1322523 -.355565 .0878390 -.101067 .5763829 -.023t07 .2683152 .2832406 .3130913 .3681764 --.179457 -.169700 -.150186
.2277352 .2742944 ,3767253 -.009039 .1017373 .9490514 1.036246 .3326720 .2931697 .2367609 .4059100 .1320986 -.305453 .1497020 .0110095 .7355829 .0489812 .3628426 .4106803 .4872207 ,4626760 --.117662 -.086390 -.036353
.2214966 .2587438 ,3486886 --.021718 .0872376 .9371068 1.006863 .3t 73888 .2871399 .2284778 .3981866 .1292427 -.31t604 .1366323 -.018484 .7096443 ,0357942 .3503379 .3886081 .4498404 -1.042e7 -,t28675 --. 103657 -.063628
.1767995 .1767991 .1767991 -.084322 .0079672 .853401| 8534023 .3173888 .2871399 .2284778 .3981866 .1292427 -364354 .07151 33 -.136459 .5420653 -.040088 .2508354 .2508354 .2508354 -1.042e7 -.193723 -.193723 -.193723
1227865 1600337 24 !9784 --.081158 -,019123 ,7574706 .8272266 .3152973 .2863070 .2273758 .3970594 .1288762 -.405422 .0724309 -.229994 .3905303 -.079879 .t 029t 36 A 411838 .2024161 .3100222 -.233655 --.208637 --. 168608
43. 44. 45
Industrial Chem_ls Fertilizer Other ChemicalProducts
46 47 48 49 50 51 52 53 54 55 56
Gasoline DieselOil Fuel Oil Avturbo/Gasoline LPG and Others Cement Other Non-Metallic Mineral Products Basic Metals Fabricated Meta_Products Machinery except Electrical EFectricalMachineryand Appliances
57 58
Transport Equipment MiscellaneousManufactures
0 m
:-I > X -n m -n O -n
* Negative free trade '_tue added, a/Intermediate b/' Final _ood.
good.
O1 ¢O
54
JOURNAL
OF PHILIPPINE
DEVELOPMENT
after Presidential Decree (PD) 1991 basedon the srn'estimates. Note that differential sales tax rates were more prevalent in 1979 (with differential rates in 20 sectors), diminished in importance in 1985 before Presidential Decree (PD) 1991 (with differential rates in 10 sectors) and were completely eliminated in 1985 after Presidential Decree (PD) 1991. The amount of protection due to the markup provision, assuming that this provision is in fact discriminatory, averaged 38.69 percent in 1979, 18.60 percent in 1985 before Presidential Decree (PD) 1991, and 27.46 percent in 1985 after Presidential Decree (PD) 1991. The estimates for 1979 were higher because higher markup rates were in effect in that year than in 1985. We note that these figures are higher than the estimates of the amount of protection due to the additional capital holding costs but less than those due to the differential salestax rates. 6.
Summary/Recommendations
The following results are obtained from the analysis: (1) if we abstract from the additional capital holding costs arising from the advancedpayment of the salestax on imported goods and if the indirect tax rate on imported good,sin, isnot equal to the indirect tax rate on the domestically-produced equivalent of the same good, sd, i.e., if sm --/=sd, then the indirect tax system has a protective effect over and above tariffs on the final goods but not on intermediate goods; (2) if sm--sd and if we ignore capital holding costs, the indirect tax system has no incremental protective effect on both final and intermediate goods; (3) ignoring capital holding costs, the protective effect of a nonunified indirect tax system is significant;, (4} capital holding costs are an additional source of protection for both final and intermediate goods; (5) quantitatively, the incremental protective effect of the additional holding costs is slight; (6) the protective effect of the 25 percent markup provision, if in fact it is a source of discrimination, is not negligible but is less than the protective effect of a nonunified indirect tax system. As things stand now, given the various new tax measures implemented since 1983 culminating in Presidential Decree (PD) i991 (October 1985) which unifies the sales tax rates on semi-essential and essential articles, srnsd for all goods except automobiles. This implies that the protoctive effect of the indirect tax system now
MANASAN:
INDIRECT
TAX REFORM
55
comes only from additional capital holding costs and the markup provision, except for automobiles which are still protected due to the differential salestax rates on imports and locally-manufactured items. While these new tax measuresachieve virtual unification of the indirect tax system (which is good from the point of view of the Tariff Reform Program or TPR) they, particularly Presidential Decree (PD) 1991, have resulted in a more regressiveindirect tax system. Presidential Decree (PD) 1991 increased salestax rate on most essentials from 5 to 10 percent; the salestax rate on other articles from 10 to 20 percent, and the salestax rate on semi-essentials from 25 to 30 percent. The salestax rate on nonessentialshas not changed. What we observe, therefore, is a doubling of the tax rates on goodsin the bottom part of the "essentially" scale(presumably these goodsconstitute a larger share in the budget of lower income groups), an increaseof 20 percent in tax rate on goods in the middle part and no change in the tax rate on goods in the top part or non-essentials(presumably this group of goods accounts for a bigger share of the high income group consumption). Coupled with the reduction in the peak tariff rates on many consumption goods which is part of the TRP, this movement may unduly encourage increasedconsumption of nonessentials. From the point of view of improving the progressivityof the indirect tax system, as well as to discourageluxury consumption, the followinR alternative sales tax rates are proposed: (1) nonessentials - 60 percent; (2) semi-essentials-- 30 percent; (3) other articles- 15 percent; and (4) essentials- 5 percent. The National Tax Research Center (NTRC) estimated that this would imply a reduction of_3.4 billion in revenuesin 1986. If this revenue reduction cannot be compensated from other revenue sources,then the salestax rate on ordinary and essentialarticlesmight have to be set at 20 and 10 percent, respectively. The appropriatenessof the markup provision should be the subject of further empirical study. If it is found to be inappropriate then the markup should be eliminated since it has been shown that it is an additional source of protection and that its effect is not negligible. The removal of the advance payment of salestax on imported goods is not recommended since the additional protection arising from this is slight but the administrative inconvenience of collecting the tax at a later point might be considerable.
56
JOURNALOF PHILIPPINEDEVELOPMENT REFERENCES
Balassa,B. "Tariff Protection in Industrial Countries: An Evaluation." Journal of Political Economy (December1965). Balassa;B., ed. The Structure of Protection in Developing Countries. Baltimore: The Johns Hopkins University Press,i971. Corden, W. "The Structure of a Tariff System and the Effective Protective Rate." journal of Political Economy (] un¢ 1966). Leith, J. "Tariffs, Indirect Domestic Taxes and Protection." In Effective Tariff Protection, edited by H. Grubel and H. Johnson. GATT, Geneva, 1971. Lowe, J. A Note on the Protective Effect of Indirect Taxesin the Philippines, Tariff Commission, Philippines, 1982. Mimeographed. McKinnon, R. "Protection and Value-Added Tax." In Effective TariffProtec. t/on, ed. by H. Grubel and H. Johnson. GA'I-I-, Geneva,1971. Quintos, M. "Effective Protection Rate-Methodology." Tariff Commission. PIDS Joint ResearchProject Staff Paper SeriesNo. 86-08, 1986. Tan, N. "The Structure of Protection and Resource Flows in the Philippines." in Industrial Promotion Policies in the Philippines, by R. Bautista J. Power and Associates.Philippine Institute for Development Studies, Manila, 1979.