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Friday, March 29, 2024

Tax anxiety

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Barely two weeks after the effectivity of the government’s first package of the Tax Reform for Acceleration and Inclusion Law, various sectors are worried about the anticipated price increases that will hit all consumers as a result of higher taxes on various products listed under the TRAIN.

Analysts and consumer groups have warned that higher prices on prime commodities such as oil products will create a domino effect on all products and services.

According to Anti-Poverty Commission Chief Liza Maza, the TRAIN law will harm 21-million poor Filipinos who are living below the poverty line. True enough, the poor sector earning less than P250,000 a year will not benefit from the lower income tax scheme and will have to cope with the additional burden of higher prices.

Critics such as the non-profit IBON Foundation say that TRAIN is designed to unburden the rich while increasing the burden of millions of poor Filipinos.

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In the House of Representatives, three lawmakers from the militant Makabayan bloc have filed a petition before the Supreme Court to declare the TRAIN Law “unconstitutional” and stop its implementation. They argue that  there was no quorum, a constitutional requirement, and no voting on the night the House ratified the bicameral conference committee report of the TRAIN bill. They claim that their objections were ignored when acting floor leader Deputy Speaker Raneo E. Abu moved for the ratification of the bicameral report with “barely 10 people on the floor.”

To allay the public’s concern on the inflationary effect of TRAIN, The Department of Trade and Industry assures that excise taxes on petroleum products and on sugar-sweetened beverages should not impact product inventories purchased before Jan. 1. Typical of new policies that cause upward price adjustments, opportunities open for unscrupulous businessmen to take advantage by charging higher prices for remaining inventories acquired at lower prices. The sheer volume and geographic coverage of enterprises that will need to be monitored for profiteering will be a huge logistical challenge for regulators.

Estimates from government show that price increases will be minimal and temporary with only a 0.73 percentage point rise in inflation in 2018 and will decrease in succeeding years. Electricity rates will increase by 0.7 percentage point, food products can increase of up to 0.73 percentage point and transportation by up to 2.8 percentage point.

These “manageable” figures give the Bangko Sentral ng Pilipinas a confident attitude and maintain its 2018 inflation forecasts at 3.4 percent.

The Bureau of Internal Revenue has started public consultations on the Implementing Rules and Regulations for the implementation of TRAIN. Expectedly, many questions were raised on the implementation of the expanded withholding tax, excise tax on sugar-sweetened beverages and cosmetic surgery. The controversial SSB tax is seen as a challenge because it is a new tax levy and thus would need adequate inputs from the industry stakeholders to operationalize properly.

More revenue regulations will be issued on the withdrawal of some value-added tax exemptions, higher documentary tax, higher excise tax on mineral products, petroleum, automobiles, tobacco, coal, lower estate and donor taxes, etcetera.

This is just the first package of the comprehensive tax reform program envisioned by the administration and is expected to generate P130 billion in additional revenues. To quote the guidelines released by Malacañang, TRAIN aims to reduce the poverty rate from 26 percent to 17 percent, uplifting about 10-million Filipinos from poverty and achieve middle-income status by 2020. By 2040, the target is to eradicate extreme poverty, provide equal opportunities through inclusive economic and political institutions and achieve high income status.

Among the benefits committed from TRAIN in the next five years are: In Education, funding for 629,120 public school classrooms, or 2,685,101 public school teachers the next five years. In Health, 60,483 rural health units, or 484,326 barangay health stations, or 1,324 provincial hospitals. In infrastructure, 35,745 km of paved roads, or 786,400 km of temporary bridge upgrades, or 2.6 million hectares of irrigated land. War-torn Marawi will also be reconstructed.

Though the TRAIN took many months of debate before it was finally signed into law, ensuring that loopholes are removed in the culture of corruption still entrenched in the revenue collection agencies of government is the real challenge. The President’s political will, if need be and consistent with his style, to force accountability and transparency in the entire government will be tested.

Before even thinking of more taxes, the government should first prove its competence in collecting and administering the first tranche of TRAIN which has adequate administration measures that can set the stage for game changing reforms in revenue generation and budget spending.

How the TRAIN Law will affect all of us will be felt soon enough. We hope it works. If not, well, let’s see how we feel come 2019.

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