Wrong on the economy

The opposition has been going to town on the issue of tax reform initiatives by the Duterte administration.

They have zeroed in on what they imagine as the reform agenda’s direct contribution to runaway inflation if only to paint a picture with the darkest hues.

Cavalierly linking high prices to the tax reform agenda directly, they’ve weaponized their criticism of the Tax Reform for Acceleration and Inclusion (TRAIN) program and quite disingenuously wielded it as a broadsword.

Legislators who don’t know any better plus some seeking mandates in next year’s polls have, however, hopped onto the opposition’s bandwagon. One knee-jerk reaction that catalyzed their bloodlust is the latent fear of senators in sponsoring and appending their names to TRAIN 2, the second package of five that focuses on the corporate community, gradually reducing one of the highest corporate income taxes in the region and rationalizing our inordinately broad package of investment incentives long granted to industries once needing state support but perhaps now fully mature and self-reliant.

Employing a scorched-earth approach, the reckless gambit not simply jeopardizes the necessary funding for a critical catch-up in infrastructure development, but also threatens to condemn domestic corporations burdened by low net after tax yields.

Both of these are addressed by TRAIN 2. And that is where the opposition’s indiscriminate recklessness lies. If TRAIN 1 were a locomotive’s steam engine, TRAIN 2 is the tender or coal-car coupled just behind. Unlike all other cars which are optional, these two go hand in hand. The non -passage of TRAIN 2 guarantees the failure of the total economic agenda and leaves TRAIN 1 as a predatory blight on the economy.

Circulated and published releases allow us to briefly go through their most often repeated criticisms, quoting them verbatim, responding to each and deriving from the sum what appears as an agenda behind their criticism. Most are encapsulated in a statement by one senator and represents the total offensive of the opposition.

One, they prescribe the halting of “further taxes on fuels mandated by the TRAIN Law until inflation is brought under control.”

Critics should first crunch the cost numbers before making such proposals. Inflation is not caused by taxes. It is either demand-pull or cost-push economic forces behind it. As a percentage of price the TRAIN excises were not a significant price inflator. The negative impact they want addressed was not caused by TRAIN.

Moreover, critics must realize that TRAIN 1 and its effects cannot be reversed. A reversal will not bring down prices, but it will throw fiscal balances out of whack. And that is a far costlier nightmare.

Critics likewise scream, “(T)here must be ‘speed, speed, speed’ in the government’s ‘Build, Build, Build’ program, even as we judiciously scrutinize the loans that were acquired for the said big-ticket infrastructure projects.”

We agree. Remember it was the previous administration that was not simply “slow, slow, slow,” but also “corrupt, corrupt, corrupt.” Of note are the Aquino administration’s handling of the MRT-3 maintenance, the Yolanda rehabilitation and the Barangay Health Center programs.

Critics likewise mimic the Leftist’s demand that “the state must help workers receive a higher take-home pay to increase their purchasing power.”

Such permanent solutions to a temporary situation not only increase systemwide unemployment, but result in economic uncompetitiveness.

Finally, critics want the administration to “certify as urgent the passage of Senate Bill 1671, otherwise known as the ‘Bawas VAT’ bill, to provide relief for the lower economic deciles of the population affected by the TRAIN law by lowering the existing VAT rate to 10 percent from the current 12 percent.”

Analyze the macroeconomics. The opposition has it wrong. It is precisely the lower deciles who benefit from TRAIN’s package of reforms. Value-added taxes have nothing to do with it.

All told, these are random, ill-conceived brickbats. Nothing more.