DOF disputes suspension of excise tax reform law

The Department of Finance (DOF) abhors the suspension of measures under the Tax Reform for Acceleration and Inclusion (TRAIN) law, as this will result to a slowdown in the government’s infrastructure buildup program under the “Build, Build, Build” (BBB) initiative. Such a measure should also hamper the salary increases for the country’s uniformed personnel, among other unintended consequences.

Finance Secretary Carlos G. Dominguez III pointed out on Thursday that suspending excise the taxes levied under the TRAIN law to help keep inflation levels in check as pointed out by the Senate would only result to a slowdown in the BBB program designed to modernize the country’s infrastructure backbone.

“Suspension of the tax-reform program will certainly tend to slow down the BBB program, and possibly negatively affect the government’s ability to fund the free tuition fee program, as well as increase in salaries of the police and the military,” Dominguez told financial reporters in a text message.

On Wednesday the Senate Economic Affairs Committee hinted broadly of suspending later this year the excise tax levied under the TRAIN law to help keep runaway inflation in check, Sen. Sherwin T. Gatchalian said.

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.

Gatchalian pointed out 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,” adding 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.”

Headline inflation in April accelerated to 4.5 percent, the fastest in more than five years. The full-year target of the government for inflation ranges from 2 percent to 4 percent.

In January the DOF said the rolling out of the 75 flagship projects worth a combined total of $36 billion in investments under the Duterte administration’s BBB program will modernize the country’s infrastructure backbone and will help sustain the country’s rapid growth.

According to DOF Undersecretary Grace Karen G. Singson, the BBB program is in keeping with the government’s goal to sustain rapid growth, attract investments and attain economic inclusion for all Filipinos.

She added that the enactment into law of the TRAIN, which will ensure a steady revenue flow totaling P786 billion over the medium term, along with prudent fiscal management and declining debt service payments, will help make the ambitious infrastructure buildup financially feasible

Singson, who heads the DOF’s Privatization Group and Office of Special Concerns, said the Duterte administration intends to spend $158 billion over the next five years on its BBB program, such that infrastructure spending would equal 7.3 percent of GDP by the end of the President’s term in 2022.

The 75 flagship projects, that consists of six airports, nine railways, three bus rapid transits, 32 roads and bridges, and four seaports, will help bring down the costs of production, improve rural incomes, encourage countryside investments, make the movement of goods and people more efficient, and create more jobs in the country, among others.

For 2018 the national budget program has earmarked P1.1 trillion for infrastructure development with the budgets of the Departments of Public Works and Highways and Transportation growing by 40.3 percent and 24.3 percent, respectively.

The TRAIN will partly fund the infrastructure program, as 70 percent of the incremental revenues from the tax-reform law will be earmarked for infrastructure.

In January this year, President Duterte signed Joint Resolution 1 increasing the base pay for the uniformed personnel in the country, including policemen and soldiers. The resolution crafted a two-tranche increase in 2018 and 2019.

In March the Commission on Higher Education launched the implementing rules and regulations for the free tuition law, saying the government will shoulder the tuition and fees of students enrolled in 112 state universities and colleges, 78 local universities and colleges, and technical-vocation education and training programs registered under the Technical Education and Skills Development Authority, starting school year 2018-2019.

The budget for the free tuition program set aside in the current budget year amounts to P51.4 billion.

Turning Points 2018
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