Mitigating the effects of TRAIN

“To protect the poor and vulnerable, the Duterte administration has started implementing social mitigating measures to targeted beneficiaries.”

On December 19, 2017, President Rodrigo Roa Duterte signed into law the Tax Reform for Acceleration and Inclusion (TRAIN) bill to enable a simpler and fairer tax system for all Filipinos. Since the law took effect at the start of the year, we have felt its positive effects.

For most of us, the TRAIN Law was a welcome development as it increased the take home pay of 99 percent of income taxpayers, who have carried most of the tax burdens in the past.

They now receive the equivalent of a 14th-month pay.

Moreover, both the estate and the donors’ taxes are down to 6 percent, from the previous 15 to 20 percent, and additional sin taxes on sweetened beverages and cigarettes support our public health goals.

On the other side, there have also been objections to the implementation of the new tax system. Those who oppose the TRAIN Law mistakenly claim that it is principally responsible for the elevated inflation rate in the country. And that because of the higher excise tax on petroleum products, TRAIN has caused the increase in prices of basic commodities. This is barking up the wrong tree. Price increases at the pump are primarily due to major spikes in international crude prices and the depreciation of the peso against the US dollar.

I have received messages from my former law students in UP, especially those from the evening classes who are mainly working students, bemoaning the possible increase of fares. Some have said the prices of food have also increased.

Again, TRAIN’s contribution to these increases is minimal, and far outweighed by its benefits to society.

On a lighter note, I have also received complaints from some of my former students, not about the increasing prices, but the added academic workload, especially to those taking taxation.

Levity aside, there have been calls to suspend the law, pending review of its effects. But if the TRAIN Law were to be suspended, it would most certainly cause more harm than good.

Rising prices were caused by external factors in the last five months, such as a cut in supply by oil-producing countries and US sanctions on Iran that led to higher oil prices.

The increase in US interest rates that led to the peso depreciation, which made our oil imports more expensive.

Of the P13 increase in diesel between May last year and May this year, only P2.8 pesos, including VAT, is due to TRAIN. The short supply of NFA rice, likewise, caused inflation to rise, which has now been addressed.

Without TRAIN, our inflation rate last month would have been 4.2 percent instead of the 4.6 percent, per the Department of Finance (DoF) projection. It is lower, yes, but not by much.

This is not to say that President Duterte does not understand the plight of those adversely affected by high prices, whether due to TRAIN or not. In fact, during the last cabinet meeting, the Department of Finance presented to the President multi-agency efforts to mitigate the effects of TRAIN on our less fortunate kababayans.

The President is committed to helping the poor cope with higher prices regardless of the cause.

To protect the poor and vulnerable, the Duterte administration has started implementing social mitigating measures to targeted beneficiaries.

First, through the Department of Social Welfare and Development (DSWD), the government is in the middle of implementing the Unconditional Cash Transfer (UCT) program.

Under this scheme, 10 million families and indigent senior citizens will receive benefits from the DSWD. The 10 million are comprised of 4.4 million households from the Pantawid Pamilyang Pilipino Program (4Ps), 3 million indigent senior citizens, and another 2.6 million families from the Listahan database (in addition to 4Ps beneficiaries).

To date, the government has released P10 billion from UCT funds and this has been distributed to 3.7 million household beneficiaries of 4Ps as of last week. The assistance being given to 4Ps beneficiaries started in March and will run until this month.

On the other hand, the payout for indigent senior citizens has begun in Region 3, and will continue to spread throughout the other regions next month. We aim to finish distributing assistance to all social pensioners by September.

To ensure that only the correct beneficiaries are given assistance, the DSWD has been validating the list of 2.6 million non-4Ps beneficiaries. The validation process is estimated to be accomplished by the end of this month, while the payout will run from August to September this year.

Second, the government, through the Department of Transportation (DoTr), will finalize and soon launch the Pantawid Pasada Program under the train law to alleviate the impact of the rising prices of petroleum products on public utility jeeps (PUJs).

All PUJs with valid and legitimate franchises from the Land Transportation Franchising and Regulatory Board (LTFRB) will automatically be included in the Pantawid Pasada Program.

These PUJ franchise holders will receive around P5,000 as subsidy for the first tranche of the Pantawid Pasada Program, from July to December this year. The subsidy will be given via the Fuel Subsidy Card, which will be distributed starting next month.

Long-term solutions are also being put in place. Foremost is the push for rice tariffication that will immediately reduce the price of rice by as much as P7 per kilo, on DoF estimate. This will significantly reduce inflation and help Filipino families, especially the poor, as rice accounts for 20 percent of their consumption. The economic team has urged Congress for speedy passage of this measure.

In addition, Build, Build, Build will lower logistics cost, especially the Micro, Small and Medium Enterprises (MSMEs), making it cheaper to transport food and goods.

These are just but some examples of measures the Duterte administration has put in place to mitigate the effects of the TRAIN Law. We will continue to see the positive effects of our new tax system over the long run and these birthing pains will soon be a thing of the past.