The Supreme Court and its Inflationary Effect on the eVAT Law

Noone doubts that the new VAT law will cause inflation.  Even if prices remain stable at the time the law takes effect, the 10% tax will immediately make some items 10% more expensive. This will trigger a round of price increases and therefore, affect the inflation rate. 

The problem is that in real life, the mere threat of price increases causes inflation as businesses take action in anticipation of inflation.  In the case of the eVAT, this phenomenon is being dragged out by the Supreme Court’s TRO.  In the middle of the year, regional wage boards already raised the minimum wage all over the country.  That already resulted in a round of inflation on top of the one that happened as the eVAT was coming into effect. 

To make matters worse, the Supreme Court still hasn’t lifted the TRO.  Having just read the Court’ unanimous decision on the eVAT case,  I wonder why they didn’t do that. The Court demolished all the arguments raised by the Petitioners.  Reading through the Court’s resolution, the petitions filed seemed to be no stronger than the Lozano complaint  (which makes me wonder why they even issued the TRO in the first place).  And since not a single Justice dissented from the majority opinion, any motion for reconsideration stands a snowball’s chance in hell in ever being granted.

So lift the TRO now.  The longer this drags out, the more inflation this law will inflict on our economy.  While the Court seems to pride itself in taking nationalistic positions in matters of economic policy, this is one case where they’re causing more harm than good.