Economists urge retention of TRAIN revenue goal

The Foundation for Economic Freedom (FEF) has appealed to the Senate to preserve the revenue goals of the first package of the tax reform program,which it claims are essential in funding the key programs of the Duterte administration.

In a statement, FEF said it fully supports the passage of package one of the Tax Reform for Acceleration and Inclusion (TRAIN), which the group sees as crucial in enabling the government to finance the country’s accelerating infrastructure development and improving cash transfer programs for the poor and marginalized.

According to FEF, revenue generated from tax reform is also urgent as the government faces new spending mandated by Congress such as free tuition in state universities and colleges, free irrigation, and increases in social pension benefits.

“We commend the work that the Department of Finance (DOF) and both Houses of Congress have put into this endeavor over the past several months. However, we believe that some provisions in the Senate version need to be reviewed further,” FEF said.

“Unfortunately, the incremental yield of the present Senate bill will barely cover the estimated cost of these public services and the requirements of the government’s infrastructure program Build Build Build,” it added.

As the determination of the final version of the package one in the bicameral conference committee moves closer, FEF encouraged legislators to strive for a package that will give the country “a fighting chance to fund and implement key programs while still staying within a manageable deficit level of not more than three percent of the gross domestic product.”

According to the group, revenue projection of the Senate version which is still under deliberation, is less than the overall goal to raise P134 billion to fund key programs in infrastructure, education, and health. The funds are also intended to improve social protection programs to mitigate the adverse effects of higher consumption taxes.

FEF said while the Senate bill’s lower fuel tax at P1.75 per liter versus the House-approved P3 per liter looks more favorable to the poor, it would translate to a corresponding reduction of revenues ranging from P73 billion (House version) to P40 billion (Senate version).

“Therefore, the expected revenue from fuel tax under the Senate bill would likely be insufficient to fund proposed programs such as the targeted cash transfers and public utility vehicle modernization. Adopting the P3-2-1 yearly increase in the fuel excise tax starting 2018 will help ensure the revenues needed to fund these proposed earmarked programs are generated,” the group said.

Of the 70 exemptions the DOF had proposed to be removed, only 37 have so far been repealed in Senate bill, according to the FEF.

The long-term gains from the new taxes being proposed should outweigh the concern regarding political backlash, it said.

The TRAIN as proposed by the Duterte administration is a combination of “pain and gain” that will benefit the poor and the middle class,” FEF added.

FEF counts among its members top economists, former cabinet secretaries and undersecretaries, and members of the business and finance community.