IMPLEMENTATION of the Tax Reform for Acceleration and Inclusion (TRAIN) law and the peso depreciation will not increase the cost of “Build, Build, Build” (BBB) and flagship projects, according to the National Economic and Development Authority (Neda).
Socioeconomic Planning Secretary Ernesto M. Pernia acknowledged that prices of construction materials, such as cement, may go up due to the increase in demand for the infrastructure projects.
However, Pernia pointed out that any adjustments in costs for projects under the BBB, as well as the 75 flagship projects, had already been factored in when these were crafted.
“That has been taken into account. We expect that when there’s a big demand for something, prices will go up but when you purchase things in bulk, prices can go down, especially for government suppliers,” Pernia told the BusinessMirror in an interview.
Neda Undersecretary for Investment Programming Rolando G. Tungpalan explained that when projects are designed, the government includes cost and physical contingencies.
Tungpalan said cost contingencies pertain to financial room for price increases, while physical contingencies refer to the duration of project implementation.
He added that in the case of projects financed by dollar-denominated loans, which form the bulk of BBB and flagship projects, foreign-exchange adjustments are not that significant.
The Neda official explained that dollar-denominated loans can finance payments needed for imported construction materials and, thus, will not be affected by foreign-exchange adjustments.
“The rule is when they are within the approved total project cost, including contingencies, they need not come back for reevaluation except when there is scaling down as a result of changes in the ICC [Investment Coordination Committee] parameters,” Tungpalan told the BusinessMirror.
“If the project is financed by a loan, so the imported components, in terms of financing, will not be affected because your dollar loan will pay for your dollar goods. It may impact on the peso equivalent but it doesn’t necessarily result in financing shortfall,” he added.
Construction items’ prices up
The Philippine Statistics Authority (PSA) earlier disclosed that the wholesale and retail prices of construction materials in Metro Manila went up in the first three months of the year.
Data from the PSA showed the Construction Materials Retail Price Index (CMRPI) posted a growth of 2.1 percent in the first quarter, while the Construction Materials Wholesale Price Index (CMWPI) grew by 6.2 percent.
In March the CMRPI expanded by 2.3 percent, higher than the 2.1 percent recorded in February and 1.7 percent in March last year.
The CMWPI posted a growth of 6.7 percent in March, higher than the 6.3 percent in February and 3.8 percent in March 2017.
TRAIN for ‘BBB’
Data from the Bureau of Internal Revenue (BIR) presented at the hearing of the Congressional Oversight Committee on the Comprehensive Tax Reform Program law on Wednesday revealed that the revenue gain from TRAIN implementation in the first quarter of 2018 reached P39.1 billion, offsetting the foregone revenue of P26.5 billion.
Of the total revenue gain, P14.9 billion came from tobacco excise tax; P8.7 billion, documentary tax stamp; P7.7 billion, sugar-sweetened beverages; P4.7 billion, petroleum; P1.1 billion, stocks transaction of traded stocks; P1 billion, capital gains of nontrade stocks; P363.7 million, automobiles; P264.9 million, mining; P159.7 million, foreign currency deposit unit; P61 million, donors; P305,000, coal; and P7,000 from cosmetics.
The BIR also recorded losses of P23.344 billion from foregone personal-income tax; P3 billion from value-added tax; and P225.22 million from estate tax.
Revenues from TRAIN will finance the BBB program of the Duterte administration, which aims to modernize the country’s infrastructure backbone and create 1.7 million jobs by 2022.
Warning from House panel
The follow-up reforms to TRAIN may not be quickly forthcoming, a House leader said on Wednesday.
Rep. Dakila Carlo E. Cua of the Lone District of Quirino, chairman of the House Committe on Ways and Means, warned that it will be difficult for the lower chamber to approve another tax-reform law being pushed by the Duterte administration if the social benefits included in TRAIN 1 won’t be fully implemented.
This, after the Department of Finance (DOF) and the BIR admitted at the hearing that there’s still no revenue regulation for the implementation of some social benefits measures that will mitigate the impact of the new tax-reform law.
DOF Assistance Secretary Teresa S. Habitan said the finance department and the BIR are
still preparing the groundwork for the implementation of the “Pantawid Pasada” and other mitigating measures.
Under the TRAIN law, the government shall implement the Pantawid Pasada Program, or a social assistance project for commuters and public transport, and the jeepney-modernization program, to ease the impact of the oil excise tax increases on commuters and the land transport sector.
Besides the Pantawid Pasada, the TRAIN provides for additional unconditional-cash transfers (UCTs) to low-income earners amounting: at P 2,400 for 2018 and P3,600 for 2019 and 2020. The DOF said P4.3 billion has been released in the first quarter, which forms part of the total of P 25.7 billion allocated for UCTs for 2018.
The law also provides for a Pantawid Kuryente to help small power consumers in missionary electrification areas.
Quirino said the DOF and the BIR are mandated to issue immediately revenue regulations for the implementation of the provisions of the TRAIN 1.
“Let’s prioritize this [Pantawid Pasada and other mitigating measures]…quicker action on these will address the matter. Actually, you are mandated to do it right away. We should do our best to implement it as soon as possible,” Cua told the DOF and BIR.
He also directed the DOF to submit a report next week to the ways and means committee on how it will implement the Pantawid Pasada Program and other
mitigating measures.
“Make this happen faster and sooner, as we go to TRAIN 2 we cannot avoid the discussion on the effects of Train 1. It would not be easy to pass TRAIN 2 if we are still indebted to the public,” Cua said, adding, “If the people feel like the TRAIN 1 is beneficial, [the passage of] train 2 will be much easier.”
The TRAIN 2 aims to lower corporate-income tax from 30 percent to 25 percent, as well as harmonize the fiscal incentives.
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