Inflation woes

AS the country’s economic managers and the leadership of the House of Representatives prepare to push for the passage of the next Tax Reform for Acceleration and Inclusion (TRAIN) law, the Philippine Statistics Authority has revealed that the country’s inflation rate in July has reached 5.7 percent. Last month the inflation rate was 5.2 percent.

Among the items whose prices rose were food and non-alcoholic beverages. Inflation was also faster at the National Capital Region (NCR) at 6.5 percent compared with other areas. The Philippine Statistics Authority described the rise in inflation rate in July as the fastest such hike in at least five years.

This should put a dampener to the growing confidence in the House of Representatives of the lawmakers’ ability to ram through the passage of TRAIN 2 with former president Gloria Macapagal-Arroyo now the Speaker. This even as some legislators are pushing for the suspension of the implementation of the first TRAIN, specifically of the excise tax on fuel products. Arroyo, who is giving advise to President Duterte on some economic policy decisions, favors a one-time imposition of higher taxes instead of the previous staggered imposition— from say, TRAIN 1 to TRAIN 2, etc. Arroyo apparently feels that a one-time full implementation is better— the pain would only be felt one time and then it would be over.

But with the surge in the inflation rate, another round of tax imposition could be disastrous for the economy and could spark even widespread discontent than the one being felt now. For a government that is in the practice of inviting controversies and implementing strong-arm policies, this could also be dangerous.

What was observable for example when the President delivered recently his State of the Nation Address was the growing number of protesters that militants and those opposed to the Duterte administration gathered. Civil society organizations are also showing a willingness to forge unity against government’s policies.

Then there is the timing. The effect of a TRAIN 2 imposition now would run smack into the midterm election next year. The discontent will surely be exploited as an issue by the political opposition. The possibility that, say, the administration senatorial slate would be defeated would be high. This would not be good for the second half of President Duterte’s term.

But if the new tax impositions won’t be realized, the revenues that the government projected to generate won’t be produced, hampering the implementation

of the ambitious Build, Build, Build program of the Duterte administration. Without the implementation of such a program, what can it boast of in terms of achievement?

The country’s economic managers have announced a plan to rein in the rising inflation rate but considering their record, I doubt if the plan would even be effective, especially if Congress does pass TRAIN 2. The saving grace there could be the Senate, which has become increasingly recalcitrant, so to speak. Many senators are opposed to a new round of tax impositions, although it remains to be seen if they could resist the president when push comes to shove.