Essentially created as a passed on tax to consumers, the market will receive minimal impact from the projected price hike, said Winston Padojinog, University of Asia and the Pacific (UA&P) microeconomics specialist and professor, in a telephone interview yesterday. He
also brushed aside concerns from the vendors that the increase in price might prod local consumers to buy items abroad, such as Hong Kong and Singapore, where prices are lower. Mr. Padojinog
said only 11% to 12% of the 80 million Filipinos can afford to shop abroad, where majority of the total is financially dependent on the eight million overseas Filipino workers (OFWs).
More than the consumers, Mr. Padojinog
said vendors, distributors and resellers are seen to absorb some parts of the 2% increase in VAT, once passed by Congress.Congress is currently deliberating the proposal to increase the VAT to 12% from 10%, as a source of additional funding to government.
A 2% increase in VAT has a corresponding 2% increase in the base price of IT products. Mr. Padojinog
said IT companies will absorb the necessary price adjustments even risking their profit margins so as not to drive away consumers and prevent inventory build-up, which is tantamount to losses.
For an IT distributor such as MSI Digiland Philippines, Inc.
, an inventory staying for 30 days in a warehouse is already subjected to price discounts to prevent the possible losses.
"The impact is negligible for the consumers but it would really affect the companies because they do not want to keep products that are facing obsolecence.They will rather convert them to cash, rather than keeping them,"said Mr. Padojinog