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Economic managers to woo Senators to pass TRAIN 2

Finance officials on Thursday said they will woo senators to pass the second tax reform package or TRAIN 2, which was considered “dead on arrival” by some members of the Upper Chamber.

In a media briefing with Senate reporters, Department of Finance undersecretary Karl Kendrick Chua and Asst. Sec. Tony Lambino rejected what they described as the “wrong notion” that Package 2-Tax Reform for Atrracting Better and High-Quality Opportunities or TRAIN 2 will only cause spikes in prices and inflation.

Instead, he said it would lower corporate income tax for corporations, especially for MSMEs.

He added that for corporations enjoying incentives, the sunset tax exemptions and discounts would be started. Corporations that qualify for incentives, meanwhile, will be supported through performance-based, targeted, time-bound and transparent incentives.

Chua and Lambino insisted that TRAIN 2 is independent of the current and future inflation which they attributed to the surges in the price of oil in the global market as these are factors that are  beyond their control.

They also dismissed the role of TRAIN 1 in the current inflation rate, saying that it was due to the high cost of crude oil in the world market. As a short term measure, they cited the need to remove the non-tariff barriers on the importation of agricultural products.

Chua said Administrative Order No. 13 (AO13), which removes the limits and administrative constraints on the importation of agricultural goods, should be implemented.

He said it would have a bigger effect on inflation by lowering the prices of rice, fish, and meat. He also underscored the importance of the passage of the Rice Tarrification bill.

According to Chua, this is the first time that the government would go for major (tax) reforms but it has to repeatedly explain the benefits of the reform. He said no reform is perfect that will make everybody happy.

“This is the reason why it is a reform because we are addressing very deep issues while we see short term challenges that would be beneficial. We just need to explain again and again to know the benefits,” Chua said.

He said it was just unfortunate that the inflation happened simultaneously with the implementation of TRAIN 1 as he spelled out its benefits.

These include the following: first P250,000 exempt for everyone; lower tax rate for 99 percent of income tax payers; estate and donor’s tax reduced to only six percent, sustain funding for free tuition in SUCs; excise tax on sweetened beverages and tobacco to promote public health; roads, bridges, classrooms, ports are built and social services improved.

Dismissing reports that TRAIN supposedly caused inflation and did not deliver revenues, prompting various sectors, including lawyers, to call for its suspension, Chua guaranteed the country’s economic managers are doing everything to address inflation.

“We are doing everything to address inflation so they will see that this is not a concern that should derail all the other reforms,” he said.

In fact, he said the proposed TRAIN 2 will create 1.4 million jobs in the next few years. He said the biggest incentives will be given to all, including the lowering of corporate income tax rate from 30 to 20 percent over the next decade.

For a typical small medium enterprise, he said this translates to a substantital new capital that can be used to expand and create jobs.

He added that there are standard employment multipliers that is being used in the estimate that 1.4 million jobs should be potentionally created in reform.

Senate President Vicente Sotto III, meanwhile,  supported the statement of Sen. Joel Villanueva that TRAIN 2 may be ‘dead on arrival’ in the Senate.

Villanueva said the Senate would not be able to pass TRAIN 2 before the year ends.

“TRAIN 2 is dead on arrival dito with the timing, when we come back we will tackle the budget and then election fever. Also, maraming issues na hindi marinig from economic managers, why they are doing it, maraming questions,” he told reporters.

Villanueva said he would rather push for the lowering of Value Added Tax (VAT) from the current 12 percent to 10 percent.

He said it would complement the recent P25 increase in the salary of minimum wage earners.

Topics: TRAIN 2 , Department of Finance , Karl Kendrick Chua , Tony Lambino
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