The country’s trade chief said wide-ranging infrastructure projects and related social programs could stall and remain forever on the drawing boards should legislators insist on repealing the Tax Reform for Acceleration and Inclusion (TRAIN) law.
Trade Secretary Ramon M. Lopez said it should do the poor no good if the TRAIN law is repealed and as proposed by a group of seven lawmakers collectively known as the Makabayan bloc in the House of Representatives. The bloc on Thursday filed House Bill (HB) 7653 intent on revoking particular portions of the tax-reform law.
“Let’s remember that the TRAIN has no detrimental effects on the poor. There’s additional cash transfer and reduced tax rates bring[ing] higher take home pay to all minimum- and low-wage income [earners]. This helps create a larger consumer base for a more vibrant economy [with] more jobs,” Lopez told the BusinessMirror.
He cautioned against amending portions of the tax law designed to generate more revenue for the government to bankroll its flagship programs. The TRAIN was seen to boost the Treasury by P121.2 billion, or 0.7 percent of the country’s total output measured as the GDP.
A hefty 70 percent of the revenue stream were to underwrite big-ticket public infrastructures under the “Build, Build, Build” program, while the other 30 percent was allocated for social services.
“Repealing the TRAIN is not advisable as it will derail several funding for special programs also for the poor, such as the free tertiary education, greater health services, vital infrastructure, higher pay for law enforcers and the military, and many more,” Lopez said.
Steps to either junk the TRAIN law or suspend its implementation are gaining ground in both the Senate and House of Representatives, as inflation in April ballooned to 4.5 percent, the fastest in five years. This also put the year-to-date inflation to 4.1 percent, marginally higher than the Central Bank’s target of just 2 percent to 4 percent.
Sen. Paolo Benigno A. Aquino IV last Wednesday vowed to file a bill suspending the excise tax on oil under the TRAIN law and urged his colleagues to support the bid to stop the rising price of goods and services. Under the TRAIN, oil and petroleum products were levied an excise tax of up to P6 until 2020: P1 in 2018, P2 in 2019 and P3 in 2020.
Lopez said the up-trending inflation was “expected and temporary,” adding quickly that the consuming public should fully adjust to prices under the TRAIN by the second half of the year.
“The inflation being experienced is expected and temporary. [It has proven] a little higher because of movements in world prices of oil and other commodities,” the trade chief said.
Instead of protesting the TRAIN law, Lopez said it should serve the country better if Filipinos focus instead on the gains and opportunities presented by the reform program.
“Better for [the] public to focus on the positive gains and ride on the opportunities of all these growth, to get a job and acquire more skills and know-how, to move up in life, or get into business,” he said.
Trade Undersecretary Ruth B. Castelo said the effect of the TRAIN law on both the basic necessities and prime commodities should also be “very minimal, if not negligible that most [can] manufacturers absorb” instead of passing on to consumers. She added the domestic price hikes on food and fuel are the result of the movement of prices in the global market.
“A lot of other factors caused the recent increase in the price of basic necessities and prime commodities, like the increase of prices of raw materials in the global market, the increase of crude oil price in the global market and the fluctuation of the peso against the [US] dollar,” Castelo told the BusinessMirror. Simply said, the TRAIN law should not be blamed as the main factor for the rising price of goods and services, she said.
However, it appears the government’s justification for the impact of the TRAIN on the poor was rejected in some secotrs. Consumer group Laban Konsyumer Inc., for one, is determined to stop the TRAIN via appeals for executive action, legislation or judicial intervention.
Laban Konsyumer President and former Trade Undersecretary Victorio A. Dimagiba also said they stand behind HB 7653, and urged the government to repeal the TRAIN law. The group is petitioning the Supreme Court (SC) calling for the same action.
“Laban Konsyumer Inc. will pursue the Supreme Court case to its completion. At the moment, the Office of the Solicitor General had filed their comment [to our petition]. [We are now] waiting for the SC’s next action. If need be, we support the repeal, as [you may] have read in our position paper at the Senate Committee on Economic
Affairs hearing last week,” Dimagiba told the BusinessMirror.
In that paper, Laban Konsyumer called on the government to suspend the excise tax on oil and petroleum products either by amending the TRAIN law or through executive action.
“The consumers are feeling the pangs of high prices despite assistance to poor households in terms of social welfare and benefits programs, which are not adequate and, at times, delayed,” the position paper read.
The think tank IBON Foundation claimed price increases ostensibly induced by the TRAIN are permanent, contrary to claims by the economic managers that it was only temporary. In a statement issued last Thursday, IBON said the inflationary effects of the law have just started to be felt and worse were to come in the next two years when the additional levies on fuel products take effect.
IBON claimed the price of food, vegetable and fuel are significantly higher compared to last year. According to the think tank, regular-milled rice now costs P40 per kilo, from P35; mackerel scad, locally known as galunggong, now costs P160 per kilo, from P140; pork liempo now P240 per kilo, from P225; and sitaw at P100 per bundle, from P60.
IBON also said diesel in Metro Manila is now at P44.35 per liter, up by over P7, while gasoline is at P55.37 per liter, up by some P6.80. An 11-kilo LPG tank is now more expensive at P650 to P750, the think tank reported.
“The price increases from the TRAIN are very permanent, and even if inflation moderates, this does not mean the prices will be lower. It is grossly deceitful for economic managers to give the impression or claim otherwise,” IBON Executive Director Jose Enrique A. Africa said.
He added if the government wants to prevent the poor from starving, it must immediately repeal the TRAIN law.
“If the government wants to, it can immediately lower inflation and prices for the people by suspending the implementation and then repealing the grossly regressive TRAIN law,” Africa said.
President Duterte signed Republic Act 10963, or the TRAIN law, in December of last year. One of its most crucial provisions include the exemption of workers with gross annual income up to P250,000 from paying personal- income tax.
In exchange, however, excise tax is imposed on oil and petroleum products. The tax law also placed automobile excise tax at 4 percent for vehicles up to P600,000; 10 percent for over P600,000 to P1 million; 20 percent for over P1 million to P4 million; and 50 percent for hybrid vehicles.
The TRAIN also levied a P6-per-liter duty on drinks containing caloric and noncaloric sweetener and a P12-per-liter tax on beverages with high-fructose corn syrup. Essential sugar-sweetened beverages (SSBs), such as 3-in-1 coffee and milk, are exempted.
HB 7653, on the other hand, seeks to repeal the sections of the tax law on fuel products and SSBs, among others. The Makabayan bloc is hoping discussions on the measure begin the soonest possible.