Taxes and Effects on Importation and Exportation

taxes and effects on importation and exportation

I. INTRODUCTION

The rapid appreciation of the peso against the US dollar particularly in the fourth quarter of 2010 has led to the peso's overall gain of almost 15% last year. The strengthening of the peso was mainly attributed to the robust inflow of overseas Filipino workers' (OFWs) remittances, supported by the improvement in foreign portfolio and direct investments.

Mixed reactions on the peso appreciation were expressed by different sectors of the economy. The government welcomed the appreciation because of reduced debt servicing while importers enjoyed lower prices of imported products. On the other hand, OFWs whose spending power weakened and exporters whose competitiveness declined have called on the government to mitigate the impact of the peso appreciation.

Exporters have also been complaining on the low exchange rate, their dollar earned when converted is much lesser now a days. On the contrary, there are a lot of happy importers, and dollar spenders. They can buy goods much cheaper with the Philippine Peso Exchange Rate going down.

While the government is committed to support an exchange rate that is market determined, the Bangko Sentral ng Pilipinas is compelled to intervene to maintain market stability which can, however, result in huge losses. Several programs have also been introduced to mitigate the losses of affected sectors such as the extension of credit facility to exporters and investment opportunities for OFWs. While there are losing sectors, the peso appreciation presents opportunities to some. The government should prepay some of its dollar-denominated obligations. Local manufacturers should also import the much-needed capital equipment to improve their productivity.