Dominguez warns against TRAIN law suspension

Finance Secretary Carlos G. Dominguez III warned yesterday that the proposed suspension of the Duterte administration’s first tax reform law would negatively affect the country’s economy and the government’s social services.

Reacting to lawmakers’ proposal to temporarily suspend the implementation of the tax reform for acceleration and inclusion act (TRAIN) amid accelerating inflation, Dominguez said the plan will slowdown the government’s ambitious infrastructure program.

Likewise, Dominguez said the suspension of the TRAIN law will “possibly” affect the government’s funding for the free tertiary education as well as the increase in salaries of the Philippine National Police (PNP) and military personnel.

“Suspension of the tax reform program will certainly tend to slowdown the ‘Build, Build, Build’ program, and possibly negatively affect the government's ability to fund the free tuition fee program as well as increase in salaries of the police and the military,” Dominguez said in a mobile phone message.

Budget Secretary Benjamin E. Diokno earlier 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 TRAIN law 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 said. 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. The Senate Committee on Economic Affairs, chaired by Senator Sherwin T. 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.

“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 added.

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 masstransport systems.