Tax program won’t hurt poor–expert

A temporary inflation uptick driven by higher excise taxes on fuel under the proposed tax reform program won’t hurt low-income earners, a longtime member of the Monetary Board said.

Felipe Medalla, who is also former Socioeconomic Planning secretary, said “safety nets” for the poor and other vulnerable sectors provided in the proposed Tax Reform for Acceleration and Inclusion Act (Train) bill would limit effects.

“Many people will not be actually hurt by the higher inflation if you take into account the increase in the incomes that result from the reduction in the income taxes for people who make less than P250,000 a year,” said Medalla in a statement.

These safety nets include, among others: exempting earners with net taxable income of P250,000 and below from paying personal income taxes; unconditional cash transfers to households in the bottom 50 percent of the population; and subsidies for public utility jeepney operators and drivers.

The rise in commodity prices as a result of the proposed tax reform would still be in line with the targets set by the Bangko Sentral ng Pilipinas (BSP), Medalla said, with the government’s fiscal goals and spending plans “consistent with price stability and sustained economic growth of 6.5 to 7.5 percent.”

The House of Representatives passed the first of the five packages of the tax measure back in late May. The measure is seen to fund the government’s ambitious P8-trillion infrastructure program.

“The government will be spending more on infrastructure, education, health, and social programs without getting out of the framework of fiscal stability, precisely because it expects that new tax measures and improved tax collections will be able to finance a big part of the increased spending,” he said.

Medalla first joined the Monetary Board in 2011. Last week, he was designated for six more years alongside Antonio Abacan, Jr. and Peter Favila.

The government will be spending more on infrastructure, education, health, and social programs without getting out of the framework of fiscal stability, precisely because it expects that new tax measures and improved tax collections will be able to finance a big part of the increased spending Felipe Medalla Monetary Board member