ALVAREZ “The law also addresses long and overdue corrections in our tax laws and introduces a more progressive tax system where the rich and the poor contribute to give better services to our people.”

Improved social services are the main benefit from the Tax Reform for Acceleration, and Inclusion (TRAIN) that may fall on the wayside if efforts to derail it succeeds, Finance Undersecretary Paola Alvarez said.

Alvarez, also spokesperson of the Department of Finance (DoF), told Daily Tribune that poor Filipinos will be mainly affected if TRAIN is suspended as what some legislators are proposing.

“Right now, the DWSD (Department of Social Welfare and Development) has already released the initial unconditional fund assistance under the 4Ps (Pantawid Pamilyang Pilipino Program) to its beneficiaries through Land Bank,” she said.

The administration is now plugging the leakages in the cash dole program to maximize its benefits.

Another benefit from the first phase of TRAIN’s implementation is free education in state colleges and universities that President Duterte promised as well as the increase in pensions for senior citizens and Filipino indigents.

Mr. Duterte recently signed Republic Act (RA) 10931 or the Universal Access to Quality Tertiary Education Act that provides for free tuition and other school fees in state universities and colleges (SUC), local state universities and colleges (LUC), and state-run technical vocational institutions (TVI). This year, the government allocated P40 billion for RA 10931 under the 2018 General Appropriations Act (GAA) funds.

Among the most critical feature of TRAIN is the provision for a universal health care program that will be funded from increased sin tax collections as well as alcohol, sugar, sweets and other beverages.

Alvarez said TRAIN’s provision states explicitly higher take from sin taxes will go to the Department of Health (DoH) to fund the government’s health programs.

The DoF is targeting to collect some P150.2 billion from sin taxes this year.

“All these sin taxes will go directly to the DoH. So what we get from tobacco excise tax, as well as alcohol, sugar, sweet and beverages will fund the government’s health care programs for new hospitals, clinics and even free medicines,” she said.

“If you remove TRAIN, then all these projects will be derailed,” Alvarez added.

When Mr. Duterte assumed office on June 30, 2016, he pledged to uplift the lives of the Filipinos by bringing inclusive growth that will have a profound impact on the grassroots level.

Two years later, his economic managers introduced the Tax Reform for Acceleration and Inclusion law, also known as TRAIN, a comprehensive tax reform package to raise government revenues to finance its ambitious, massive projects, provide universal healthcare, free education and even lowering the personal income taxes of individuals.

Duterte declared when he signed the law on December 19, 2017, “This is the administration’s biggest Christmas gift to the Filipino people as 99 percent of the taxpayers will benefit from the simpler, fairer and more efficient tax system.

“The law also addresses long and overdue corrections in our tax laws and introduces a more progressive tax system where the rich and the poor contribute to give better services to our people.”

But only a few months after the implementation of TRAIN, several sectors were already calling for the derailment of the law as a reaction to the rising inflation in April and May because of the runaway increase in prices of basic commodities and petroleum products then. There were calls to suspend the implementation of the law, particularly the collection of the additional excise tax on oil products.

The suggestion was quickly dismissed by the economic managers of the administration saying that TRAIN law is crucial for the government’s “Build, Build, Build” infrastructure programs that are seen to catapult the economy into record growth.

The administration’s economic team maintained suspending TRAIN and adopting other band-aid solutions will only have a minimal and short-term impact on inflation and will stifle the country’s growth and delay progress toward becoming an upper-middle-income country by 2019, such that around six million Filipinos would be lifted out of poverty by 2022.

“We remain committed to doing all we can to invest in our people, and build safer communities and better infrastructure so that everybody will prosper,” the team said in a statement.

Alvarez shared the sentiments of the government’s economic team.

In an interview with the Daily Tribune, Alvarez explained how vital TRAIN law is for the government’s many programs that are aimed at supercharging the Philippine economy and pushing a sustainable and robust growth.

Alvarez explained the TRAIN law would significantly raise the government’s revenue collection efforts that would reduce poverty from 21.6 percent to a targeted 14 percent by 2022.

It was estimated 70 percent of the incremental revenues under the TRAIN will help support the government’s infrastructure modernization program which will also include strengthening of the country’s military and law enforcement capabilities, while 30 percent will go to social services to fund, among other anti-poverty measures, a targeted cash transfer program for the poorest 10 million households.

Under the approved TRAIN, the inflationary impact of the measure initially estimated at 0.9 percent will slightly go down to 0.7 percent which would have an even more minimal effect on food, electricity and transportation costs.

The TRAIN law, which is divided into five packages, is also aimed at fixing the structural problems of the tax system that has become unfair, complex and inefficient. This tax reform will also raise the revenues needed to make real, positive change for the Filipino people, she stated.

“It is the first time we have done a tax reform without any pressure from the outside, no crisis, no external pressure,” she said.

Calls for the suspension of TRAIN grew louder when inflation hit 4.6 percent in May, but Alvarez insisted the law pushed up inflation by only 0.4 percentage point, lower than DoF estimates of 0.7 percentage point. Other factors, such as the rise in global oil prices and the better collection of cigarette excise taxes drove inflation to 4.5 percent in April this year.

DoF data showed that the TRAIN made a direct impact on the prices of only a limited category of goods—non-alcoholic beverages, tobacco, electricity, gas, and other fuels, and transportation—which was felt in the first quarter.

While inflation reached 4.5 percent in April, month-to-month inflation, however, declined from 1.0 percent in January to only 0.5 percent in April. Year-to-date inflation was recorded at 4.1 percent by the DoF.

The April 2018 inflation was driven mainly by the higher prices of corn, fish, tobacco and personal transport. These price increases were due to a variety of factors, and cannot be solely attributed to the impact of TRAIN.

Tobacco prices, for instance, rose by 46 percent year-on-year in the first quarter mainly because of better tax collection.

Alvarez explained, “Some of the legislators (calling for TRAIN suspension) do not understand what we have been explaining. The effect of TRAIN to inflation is only 0.4. What this means is that even if you do not have law, all the other factors are bigger, will still make the prices of oil go up. We don’t control it. Number 2, the peso depreciation is happening not because our economy is becoming weaker. What is happening is because we have so much importation of capital equipment that our demand for the dollar is increasing.”

Surely, this TRAIN is one ride that will take us to economic progress.