DOF: Complete picture with infra spending will show poverty decline

By: Ben O. de Vera, Philippine Daily Inquirer, 30 Oct 2019

Complete the economic picture with infrastructure spending and you would see a decline in poverty rate, according to the Department of Finance (DOF).

The DOF said proceeds from the Tax Reform for Acceleration and Inclusion (TRAIN) law, if used on the Duterte administration’s more than P3-trillion “Build, Build, Build” infra program, would eventually lead to poverty decline.

The DOF issued the statement in reaction to reports quoting the Philippine Institute for Development Studies (PIDS) as saying that higher excise from TRAIN led to “increased poverty among households and individuals.”

To counter the PIDS, the DOF sent reporters copies of a brief on a study by the De La Salle University (DLSU) which said “results suggest that TRAIN has prompted additional revenue in social programs and infrastructure spending.”

“There are clear increases in the capital stock which drive economic growth,” said the study, authored by Caesar B. Cororaton, of the Virginia Polytechnic and State University and Marites M. Tiongco and Justin S. Elioraga, of DLSU’s School of Economics.

The study, with the lengthy title “Assessing the Potential Impacts of the Tax Reform for Acceleration and Inclusion and the Build Build Build Program,” said the services and agricultural sectors, however, are lagging behind.

The industry sector is “leading the way,” it said.

It added that while TRAIN, indeed, had inflationary effects in 2018 and 2019, inflation rate “decelerates after that as higher growth would significantly dominate inflationary effects.”

The study said results of simulation showed TRAIN had reduced poverty and income inequality though “very slightly.”

The study’s researchers estimated that poverty rate would have fallen to 21.053 percent, which was a smaller increment than 21.503 percent with TRAIN in place.

Last May, Finance Undersecretary Karl Kendrick T. Chua said the effects of TRAIN should not be viewed in isolation of the entire package.

“Any analysis of the impact of the tax package must look at the entire reform,” he said. To get a complete picture, he said “tax rates, social mitigating measures and earmarked spending on infrastructure and social services” should in the puzzle.

TRAIN, he added, should not be judged on the basis of “just selected provisions.”

The TRAIN law hiked excise on cigarettes, oil products, sugar sweetened beverages and motor vehicles among other goods and services. It also slashed personal income taxes to give fixed income earners bigger take home pays.

Latest Department of Finance (DOF) data showed that the P55.6 billion in first-half net revenues coming from TRAIN exceeded the P52.1-billion target for the six-month period.

Actual collection between January and June jumped 65 percent year-on-year and already accounted for 49.2 percent of the full-year goal of P113.1 billion.

The bureaus of Customs (BOC) and of Internal Revenue (BIR) exceeded their end-June TRAIN revenue targets— P13.8 billion and P41.8 billion.

Revenue waived through lower personal income tax rates was only P52.5 billion in the first half, lower than the projected P64.5 billion “due to better compliance, increase in registered taxpayers, and lower unemployment and underemployment rates.”

During the first half, better-than-expected collection from new or higher excise on oil, sugary drinks and cigarettes offset lower take from motor vehicles and VAT.

In 2018, TRAIN hauled net revenue of P68.4 billion, 8.1-percent larger than the P63.3-billion target.

For 2019, the government had programmed a total of P140.6 billion in collection from tax reform—P113.1 billion from TRAIN, on top of P27.5 billion from the ongoing estate tax and delinquencies tax amnesties./TSB