Economist urges government to hike cash transfers to the poor after TRAIN law

The Duterte administration should increase its cash transfer program under the Tax Reform for Acceleration and Inclusion (TRAIN) law to P421 monthly for the poor to be able cope with the new tax bracket, a state university economist said on Monday.

University of the Philippines School of Statistics Dean Dennis S. Mapa said the P200 unconditional cash transfer (UCT) under the TRAIN law is insufficient for the poor to survive rising inflation, which is partly caused by additional taxes of the law. For him, the economic team underestimated the amount of subsidy the poorest 30 percent need.

He argued government economists made the assumption that most of the poor are comprised of five members—the average household in the Philippines. “The cash transfer of P200 is really a wrong assumption on the family size of households,” Mapa told the BusinessMirror on the sidelines of a forum at the Ateneo de Manila University.

“The value of that is computed using the family size of five. Again, if we are targeting the poor households, they are not just five, but more,” he added.

Mapa understands the government has population control programs aimed at managing the country’s head count. However, he said what the poor needs now is additional subsidy at a time inflation is accelerating to unprecedented levels.

“My piece there is why don’t we just revisit these numbers and check it out,” Mapa said.

Taking into account inflation, particularly on food items, such as rice and fish, the statistics expert moved the government increase UCT to P301 monthly for a family of five; P361 for a family of six; and P421 for a family of seven. This way, he concluded, the impact of the TRAIN will be more manageable for the poor.

“[In the] nine months of 2019, the poorest 30 percent of the population suffered the most from increasing prices of goods, particularly food items, such as rice and fish. Higher inflation among the poor is a threat to poverty reduction efforts, [and] current cash transfers as provided by the TRAIN law is not enough to compensate the poor,” Mapa added.

Inflation, or the general increase in commodity prices, peaked 6.7 percent in September, putting average inflation at 5 percent. This was way beyond the Central Bank’s target range of 2 percent to 4 percent this year.

September inflation on the poor, on the other hand, was about 8.2 percent, according to Mapa. Average inflation on the poor is now at 5.8 percent, he added, and is expected to range from 6 percent to 6.4 percent by the end of the year from 3.1 percent in 2017.

Citing 2012 government data on consumer price index basket, Mapa said the poor spends 60.89 percent of their budget on food and nonalcoholic beverages, way beyond the household average of 38.34 percent.

Housing, water, electricity, gas and other fuels eat up 18 percent of the poor’s budget, he added, as compared to the average 22.04 percent. Transport was third top expenditure at 4.21 percent, while alcoholic beverages and tobacco were fourth at 2.5 percent.

Mapa also called on the government to reimburse poor households P294 monthly for the delay in the distribution of National Food Authority  rice. Under the TRAIN, discounted purchase of NFA rice equivalent to 10 percent of the net retail prices will be made available to the poor.

With this, poor families should be able to purchase NFA rice at P24.30 per kilo from P27 per kilo. However, the statistics expert claimed poor households have been buying P39 per kilo commercial rice from January to June due to the unavailability of NFA rice.

“To me, it seems that government economists were so high on government revenues, but slow in delivering mitigating measures needed for the poor to cope. One of the promises of the TRAIN law is to deliver social welfare and benefits program, and the government should deliver those immediately,” Mapa said.

 

 

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