Move to stop TRAIN rejected; 4.5% inflation rate alarms senators

Budget Secretary Benjamin E. Diokno rejected calls to stop the implementation of the first tax reform law, citing the recent spike in consumer

prices was just “transitory.”

Diokno explained that suspending the implementation of the Tax Reform for Acceleration and Inclusion Act (TRAIN) will “do more harm than good” for the country.

“Suspending the law is to me out of the question. It has to be implemented,” Diokno told reporters.

While the budget chief admitted there were increases in the prices of consumer goods, Diokno said the government has already provided mitigating measures to alleviate the affects of TRAIN, like the higher financial assistance given to indigent families.

“Suspending the law will do more harm than good,” Diokno said, citing tax collections of the Bureaus of Internal Revenue and of Customs significantly improved after the TRAIN’s implementation.

Sought for comment, Finance Secretary Carlos G. Dominguez III said in a mobile phone message that they “listen respectfully to Senator (Sherwin) Gatchalian’s sentiments.”

The Senate Committee on Economic Affairs, chaired by Gatchalian, had earlier said it is not discounting the possibility of recommending the suspension of the TRAIN’s implementation, especially if the inflation rate will breach the government’s target range for 2018.

Gatchalian said he would wait for the third quarter of 2018 before acting on the various proposals to suspend the tax reform law, considering that provisions of the law pertaining to excise taxes on oil, petroleum, and coal is likely to impact Filipinos especially, the poor, in 2019.

“Based on my assessment, we need one more quarter to determine whether there is a need to suspend excise taxes or not,” Gatchalian told reporters in an interview after the Senate inquiry into the status of the implementation of the TRAIN law with officials of the Department of Finance (DOF), Bangko Sentral ng Pilipinas (BSP), National Economic Development Authority (NEDA), and other government agencies and financial institutions.

“So now, we are still on the second quarter; in order to get an accurate reading we need another quarter, but that will give us enough time – three months – to suspend excise tax (on fuel), if we need to suspend it,” he said.

Inflation rate Senators Paolo “Bam” Aquino IV and Joseph Victor “JV” Ejercito have called on the government to review the TRAIN law to arrest the rising inflation rate.

They made the appeal after it was reported that inflation rate accelerated to 4.5 percent year-on-year in April.

Ejercito said the 4.5 percent inflation rate is the fastest in the past five years. The revised 3.8 percent inflation rate in February reached 4.3 percent last month.

Aquino noted that when the TRAIN bill was still being deliberated upon last year, government economic managers assured a 2-4 percent inflation rate.

Aquino said he would file a bill amending the TRAIN law and suspending the excise tax only to cushion its effects, especially on Filipinos relying on mass-transport systems.

“We want to stop parts of TRAIN. We will file (a bill) today or tomorrow,” Aquino said, adding that the increase in the price of petroleum in the global market is the major cause of inflation in the country.

Gatchalian said that while he is open to amending the law, complications may arise once they include the lowering of income tax of workers as the Bureau of Internal Revenue (BIR) has already released the Implementing Rules and Regulations (IRR) on the TRAIN law.

“We can also study that but that is going to be complicated, because if you notice, the components of tax reform are interrelated. If you tinker with one component, everything else needs to be adjusted. So we need to carefully study this to make sure it won’t be difficult for our taxpayers,” he said.

Alarming round

Gatchalian said he is actually more worried of the second round of increase under the package 1 of the TRAIN law, rather than the implementation of the second series of the tax reform program, which proposes, among others, the cutting down of corporate income tax and the streamlining of fiscal incentives.

“Actually, I am more worried about the second round of increase of petroleum products, not the TRAIN 2, because on 2019, the excise tax on fuel will be at P2. So that is my concern and what I’m monitoring because if you look at the increase during the first year, inflation already hit at 4.5 percent,” he said.

“So I’m quite worried that the second round of increase will likewise, result to higher inflation. So I urge BSP to be more vigilant. And I think they mentioned earlier that they are vigilant now given the circumstances,” he stressed.

The current price of oil per barrel, according to the Bangko Sentral ng Pilipinas (BSP), is $71 per barrel.

In last year’s Senate public hearing, government economic managers said that the price of oil per barrel was $51.

Under the TRAIN law, excise tax on petroleum products should be suspended when the oil price hits $80 per barrel.

A pre-and post-TRAIN prices of goods, according to statistics given to Senate reporters by Gatchalian office, showed that diesel posted the highest increase in the price ladder at 17.5 percent which is P40.2 per liter covering the Jan. 18 to April 18, 2018 period, from P34.2 per liter from Sept. 17 to December 17, 2017.

This is followed by ampalaya at P116.4 per kilogram from January 18 to April 18, 2018 or a jump to 10.2 percent; and fresh fish, bangus at P144.7 per kilo from January 18 to April 18, 2018 or a 10.1 percent change in prices.