‘TRAIN’ put P32 billion in people’s pockets–D.O.F. to critics

By Rea Cu, BusinessMirror, May 29, 2018

FILIPINOS have about P32 billion more to spend monthly as a result of the personal income tax (PIT) cuts under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the unconditional cash transfer program, the free tuition in state universities and colleges (SUCs), and the additional wages paid by the government under its aggressive spending program, resulting in higher domestic demand.

That’s the glass half-full view offered by the Department of Finance (DOF), amid concern that much of the inflation now squeezing ordinary Filipinos’ bottom lines owes to the impact of the TRAIN law, which also mandated higher fuel excise taxes, among others.

Finance Secretary Carlos G. Dominguez III said the consumer-friendly measures implemented under the Duterte watch gave Filipinos an additional P32 billion combined each month to spend, which would inevitably drive up prices, that can be attributed to the increase in inflation levels for April this year.

The PIT cuts under TRAIN gave taxpayers an additional P12 billion in their pockets each month; the free tuition in SUCs to be made available in June also freed up another P3.5 billion that families would otherwise have had to save up for in order to shoulder school fees in May; and the unconditional cash transfer contributes some P2.5 billion per month.

The government’s increased spending of P167 billion for the first quarter falling under its “Build, Build, Build” infrastructure program also included wages paid to laborers, which amounted to around P15 billion a month, the DOF noted.

“So you have around P32 billion being spent by people, and that will tend to drive up prices. That is demand. So that is part of the reason [for the higher inflation],” Dominguez said during a hearing of the House ways and means committee on the Duterte administration’s second tax reform package.

The government has also released P4.3 billion worth of unconditional cash transfers (UCTs) to low-income households as part of TRAIN’s social mitigation measures, which have so far reached 1.8 million Pantawid Pamilyang Pilipino Program (4Ps) beneficiaries in the first quarter. Another 2.6 million household beneficiaries are in the process of getting their cash subsidies in May and June. For 2018, some P24 billion will be released to cover the poorest 10 million households.

The finance chief, likewise, pointed out that despite the elevated inflation rate, self-rated poverty and hunger have gone down as shown by the first-quarter survey done by the Social Weather Stations (SWS).

“It’s very strange that, while inflation increased, hunger and self-rated poverty decreased. These are not government figures, these are figures from the private sector. So I guess to some extent, the program of President Duterte in his Build, Build, Build and in his tax reform program are working. The average Filipino has more money in his pocket and, in a sense, is better off,” he added.

The SWS’s First Quarter 2018 Social Weather Report showed that from 32 percent in December 2017, the number of self-rated poor families dropped to 29 percent in March 2018. The number of families experiencing involuntary hunger declined from 15.9 percent in December 2017 to 9.9 percent in March 2018, as shown by the same survey.

The discussions at the hearing on Tuesday at the House of Representatives focused mostly on Package 2 of the Comprehensive Tax Reform Program (CTRP), but several lawmakers asked about the impact of TRAIN—which took effect January 1—on inflation, which reached 4.5 percent in April. During the hearing, Dominguez asked lawmakers to approve Package 2 as he allayed fears about the impact on prices of TRAIN, which contributed less than a half-percentage point to last month’s inflation rate.

The TRAIN accounted for only four-tenths of a percent of April’s inflation rate of 4.5 percent, which means that for every peso increase in prices, only 9 centavos can be attributed to TRAIN, the DOF said.

Package 2 of the DOF’s proposed CTRP has been adopted under House Bill 7458, which aims to lower the corporate income tax and reform the investment incentives system in the country.