Econ advocacy group nixes suspension of new tax law

A suspension of the Tax Reform for Acceleration and Inclusion (TRAIN) Law would ultimately increase the country’s debt burden, slowdown economic growth and exacerbate poverty, according to fiscal policy advocate Action for Economic Reforms (AER).

In a statement, AER fiscal policy coordinator Jo-Ann Diosana warned that suspending the tax reform law would deprive the government of resources to implement its infrastructure and social service programs, resulting in higher fiscal deficit and debt.

“Blaming TRAIN as the main culprit of increasing prices of commodities and calling for the policy’s suspension will exacerbate the deficit, resulting in even worse effects other than inflation,” Diosana said.

“We will face a higher debt burden and potential downgrading of our credit rating. Ultimately, this will curb the country’s growth momentum and dislocate the government’s capacity to attract more investments and generate more jobs,” she said.

According to Diosana, stopping the implementation of the TRAIN law would also deny the poor of social services programs – such as unconditional cash transfers (UCT) and free college education.

She said this would also affect the government’s ability to address the country’s infrastructure gaps, which would result in higher costs of production and further drive higher inflation.

“Without sufficient financing, ambitious programs – such as free college education, free irrigation, and roads and bridges under the Build Build Build program – will not be realized. What better way to finance these programs than by restructuring our outdated tax system, which is exactly the intent of the TRAIN law?” Diosana said.

Instead of TRAIN’s suspension, AER urged lawmakers to ensure the full and timely implementation of the UCT, which it said would cushion the impact of higher prices to poor households.

“The Department of Social Welfare and Development (DSWD) should step up its game to rapidly deliver the monthly P200 cash transfer to over 10 million households as mandated by the TRAIN law,” Diosana said.

The group also called for the government’s stricter monitoring of prices and enforcement of laws against profiteering establishments.

Calls to suspend the tax reform law were issued by various groups amid a rising inflationary environment.

In May, inflation further accelerated to a fresh five-year high of 4.6 percent, also up from the previous month’s 4.5 percent pace and last year’s 2.9 percent.