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Excise Tax Increases Cause Inflation To Spike Upward


September 5, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

The government’s excise tax increases on beer, hard liquor, wine, and cigarettes caused inflation in Puerto Rico to spike upward in July.

According to the latest Department of Labor & Human Resources statistics, the price of alcoholic beverages alone jumped 8.5% from June to July 2002. The excise tax increases were implemented in mid-June 2002.

Overall, the island’s consumer price index (CPI) registered gains of 1.4% month-to-month between June and July 2002 and 8% since July 2001. Since 1995, the year-to-year increase for the month of July has–up until now–never exceeded 6.3%.

Lower crude oil prices in July helped temper the inflationary effect of the excise tax increases. Transportation costs in July were 0.5% lower than in June and 0.8% lower on a year-to-year basis.

The excise tax hike on cigarettes was reflected in the 2% month-to-month increase in the catchall consumer price index category of other articles and services.

As a result of the inflationary pressures, the purchasing power of the dollar fell from 49 cents in June to 48 cents in July. The purchasing power of the dollar is measured relative to its full value in 1984.

The island’s consumer price index as a whole reached $206.90 in July, which means that it cost $206.90 to purchase goods and services that had cost $191.60 in July 2001 and $100 in 1984.

Economist Juan Castañer said the statistics corroborate a Heidi Calero & Associates study conducted earlier this year which estimated the inflationary impact of the excise tax increases.

Meanwhile, according to sources, a revision of the CPI’s sampling methodology is near completion and should be announced shortly.

This Caribbean Business article appears courtesy of Casiano Communications.
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