DOF downplays inflation impact of TRAIN package
MANILA – F i n a n c e secretary Carlos Dominguez III downplayed the potential inflationary pressure that the first package of the Duterte administration’s tax reform initiative on the prices of goods and services is expected to bring.
Dominguez said an average taxpayer earning P250,000 per year, who will soon be exempted from paying personal income tax, will gain around P20,000 a year.
“The average taxpayer will gain about P20,000 per year. Sure there will be some items that will go up but we do not believe that P20,000 per year is going to be eaten by any possible inflation,” Dominguez said at a briefing in Bulacan on Tuesday.
The Senate and House of Representatives versions of the Tax Reform for Acceleration and Inclusion (TRAIN) have been reconciled during the bicameral conference late Monday.
The ratification by both houses of the bicameral version of the bill is expected on Tuesday.
Once ratified, the TRAIN will be referred to President Rodrigo Duterte for his signature and enactment.
The first package of the administration’s tax reform measure aims to reduce personal income tax rate and at the same time increase excise tax on petroleum products, automobiles, sugar sweetened beverages, expand value-added tax base as compensating measures.
This c o mpensating measures, however, met several oppositions from various groups as well lawmakers as it will negate the purpose of reducing personal income tax.
With this, Dominguez said that pass through to inflation of increase in fuel cost has become small.
“We have to remember that unlike in the past there was direct pass through with the cost of fuel and inflation. The economy has grown so big and so robust that the pass through is very small now,” Dominguez said.
“I’ll give you an example, in 2016, the price of fuel went up 75 percent but the inflation rate went up 1.8 percent so the pass through is not anymore a direct relationship as it was before,” he added.
The Finance chief reiterated that the revenue compensating provisions in the TRAIN are essential since the government’s net revenues are expected to be reduced by P146 billion resulting from exempting those earning P250,000 and below from paying income tax.
“We also have to raise taxes because we are embarking on a very large infrastructure program t hat has been neglected for many years,” Dominguez said. ( News)
GMA