The Christmas TRAIN
As I write this, the bicameral conference committee is still working out the government’s proposed Tax Reform for Acceleration and Inclusion, more popularly known as TRAIN, a measure that would boost the national coffers by at least R120 billion.
In any law-making process, chugging down the rail of the bicameral conference committee is almost always a tedious process as this is the venue for comparative analysis and negotiations with the end in view of producing an act that is acceptable.
This is notwithstanding the possibilities of introducing incremental but appropriate provisions to give more teeth in implementing the law. One bone of contention is the expected increase in the cost of electricity arising from the imposition of tax on coal consumption, which Bayan Muna Congressman Carlos Isagani Zarate tagged as anti-poor. “In the power sector alone, it would cause annual power rate hikes that would hit the poor more especially with the impending tax on coal because most far-flung areas and small power utilities groups generally use coal and diesel to produce electricity and they would pass the additional tax completely to consumers.”
Some industry energy players believe otherwise. An industry player explains that coal consumption of the country is roughly 25 million metric tons (MT) annually. At R1 per kilogram tax (about R1,000 per MT), the government earns R25 billion per year, which will increase electricity prices by R0.20/kilowatt-hour. Admitting the uptick in the electricity cost, the industry source says, “There are other ways of reducing electricty cost,” such as reducing system loss allowance and reducing the stranded costs. Still, the source says whatever excise tax imposed on fuel, including coal, there will be 12 percent additional revenue for the national government, given the VAT (value-added tax).
TRAIN is a game changer– its domino effect, enormous!
For the government, Finance Secretary Carlos G. Dominguez has said in no uncertain terms that this tax reform measure is a catalyst for the country to be on the radar screen of foreign investors. Among its regional peers, the country has been a laggard in attracting foreign investments, due in part to poor infrastructure. With the TRAIN, the national government will be able to pump-prime the domestic economy by having a steady source of revenues to bankroll its “Build, Build, Build” program. Government’s massive capital expenditures is almost always welcome as it is synonymous with job creation. Other sectors of the economy will likewise benefit.
Then there’s tax exemption for salaried employees earning R250,000 annually as well as lowering of the tax rate, which could alleviate living conditions as it means additional money; thereby poverty reduction is achieved. This is best exemplified in the “infomercial” being aired in TV stations while the proposed TRAIN bill was undergoing scrutiny in both houses of Congress.
And, for corporates, passage of the TRAIN will make a big difference in shaping up business plans.
The momentum for further economic acceleration is here. TRAIN plays a strategic role in maximizing the growth potential. Thus, in whatever fashion the TRAIN will eventually run, market players and corporations’ top honchos are one in saying that its passage is a positive development moving forward. Authorities are looking at January, 2018, for its implementation. In step with the Yuletide season, here’s hoping it will be a Christmas TRAIN.
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