The Senate Economic Affairs Committee hinted broadly of suspending later this year the excise tax levied under the Tax Reform for Acceleration and Inclusion (TRAIN) law to help keep runaway inflation in check, Sen. Sherwin T. Gatchalian, panel chairman, said after presiding over a public hearing on Wednesday.
Asked if rising inflation warrants the suspension of the excise tax schedule imposition of
higher tax imposed in the TRAIN law, Gatchalian indicated he would “need one more quarter” to assess if the situation warrants tax suspension.
“In my opinion, we need one more quarter to make a decision,” Gatchalian told Senate reporters after the hearing. “We are only in the second quarter [as of now]. So, we need one more quarter.”
Gatchalian said the committee would move to further review the inflation environment, adding: “It is very clear that when inflation goes up, it’s the poor that gets hit harder by rising prices.”
The senator told reporters that when inflation “goes past 4 percent, then we will have to recommend drastic measures either to suspend the excise tax or to add more cash transfers.” He added the members of the Committee on Economic Affairs would then “have to make a decision on what to do by the end of the third quarter.”
At the same time, Gatchalian welcomed Sen. Bam Aquino’s plan to file a bill to suspend implementation of the TRAIN law.
“It [filing the bill] is good so we can deliberate on it,” Gatchalian said, quickly adding, “filing a bill will open up the discussion.”
He further said, “We will need one more quarter to have an accurate reading. One more quarter will give us enough time—at least three more months; we can discuss if we need to suspend the TRAIN law or increase cash transfers,” referring to the P200 government subsidy for poor families.
“If you ask me, it should be raised to P400 at the very least, to cover the impact of higher oil prices that trigger upward adjustments in
prices of basic commodities,” including the impact of the increase in the price of gasoline at the pumps.
Moreover, Gatchalian also claimed one of the prime triggers of the rice-price hikes was the disappearance of rice supplied by the National Food Authority (NFA) in the markets.
“I have to emphasize that one of the biggest reasons commodities prices have risen so high is because NFA rice is not in the market and that is also why inflation is so high.”
He pinned the blame on “mismanagement of the NFA,” adding that its officials should move to correct the situation, or risk another round of rice-price hikes. “NFA rice supply should be managed well because that is key in bringing down the price of commodities for the Filipino consumer,” he said in Tagalog.
Gatchalian also welcomed the “mitigating measures” that Aquino is set to file this week calling for a scale back in the personal income tax even though this would cut the government’s revenue take. “Definitely, I foresee problems in reducing the income tax for those earning P250,000.”
The senator added: “So we reduce the tax on those earning P250,000 but extract an excise on fuel. So we need to study the matter closely. It is important this is thoroughly discussed and analyzed.”
Gatchalian also acknowledged that the Committee on Economic Affairs is reviewing possible adjustments to the excise tax schedule under the TRAIN law.
“That’s correct,” Gatchalian said when asked if the Senate is leading to that direction.
“What is important here is to check inflation and, as shown in the hearings, rising prices felt most by the poor sector. So we are taking steps, and one of them is the possibility of suspending the excise tax or increase the cash transfer program for the indigent sector.”
The review includes adjustments on excise tax-exempt areas as well, he said.
“We are also looking into that,” he added.
In the same interview, he did not rule out the Senate considering proposals lowering the income tax exemptions.
“We can study that,” the senator said, even as he admitted “this will be complicated, as the IRR [implementing rules and regulations] of the Bureau of Internal Revenue had already been issued, so there are these complications.”
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