Senators Bam Aquino and JV Ejercito on Tuesday urged the government economic managers to suspend the Tax Reform for Acceleration and Inclusion law currently being implemented to arrest the rising inflation rate.
After months of calling for a review on the Tax Reform for Acceleration and Inclusion (TRAIN) Act, Aquino expects tomorrow’s Senate probe on TRAIN and inflation to produce tangible results, even look into the suspension of excise taxes.
They said that while going around the country, the public complained about the high cost of commodities.
Aquino cited the huge impact of TRAIN on the prices of our prime commodities that burden Filipinos.
“We owe it to the Filipino people, especially the poor, to ensure that TRAIN is not making lives more difficult. We must look for immediate solutions, like the suspension of excise taxes,” said Aquino, one of the four senators who voted against the ratification of the TRAIN law.
Aquino was referring to the excise tax on petroleum products under the TRAIN Act, which imposes P7 and P2.50 additional levy on gasoline and diesel, respectively.
As early as January, Aquino has filed Senate Resolution No. 597, urging the appropriate Senate committee to scrutinize the implementation of the unconditional cash transfer to ensure that it is sufficient to cover the increase in prices of goods and other services.
More recently, Aquino also filed Senate Resolution No. 704, urging the appropriate Senate Committees to conduct an inquiry on the TRAIN’s inflationary impact and effect on the economy, particularly the P7 and P2.50 excise tax increase on gasoline and diesel, respectively.
The Senate Committee on Economic Affairs, headed by Sen. Sherwin Gatchalian, will conduct the hearing on Wednesday (May 9) on the effects of TRAIN on the prices of goods and services and in the inflation rate, which reached a five-year high in April at 4.5 percent.
Ejercito, meanwhile, made the call after media reported that the headline inflation rate accelerated to 4.5 percent year-on-year in April, which was the fastest in more than 5 years. The full-year target is 2-4 percent.
“It might be wise to consider suspension of the TRAIN law if the trend continues to breach the inflation threshold,” Ejercito said.
Ejercito express alarm when the March inflation rate reached 4.3 percent, from the revised 3.8 percent in February.
“The economic managers should seriously review the TRAIN law given the upward trend of the numbers. They should assess whether the increase in inflation is still manageable. Otherwise, implementation of TRAIN 1 should be suspended and re-studied,” he said.
During the Senate deliberation of the TRAIN, both the Department of Finance and the National Economic Development Authority had claimed that the measure would likely raise the inflation level by (just) 0.7 percent this year.
The two agencies had even assured that the inflation rate would still be within the projected 2-4 percent target.
He added: “My worst nightmare about the TRAIN law has become a reality. I had warned this before that the TRAIN is inflationary in nature. The common people may not know what inflation is, and they don’t care. What they do know and what they care about is that prices of food and other necessities have all gone up.”
The idea of the tax reform was to decrease the personal income tax, giving the people more purchasing power.
However, he said, the rising prices of commodities would negate the positive impacts of TRAIN law on income.
Ejercito said that the negative effect of the higher inflation rate is more felt by the bottom 30% of Filipino households.
In the House of Representatives, Rep. Gary Alejano has filed a resolution calling for a review of the TRAIN law and its impact on ordinary Filipinos amid the current surge in inflation.
In a press conference on Tuesday, Magdalo Rep. Gary Alejano said Congress should evaluate the government’s tax reform program and recommend its continued implementation or suspension and come up with measures to cushion its effects on the poor.
“The current increase in inflation exceeding government targets plus the possible effect of the increase in prices of fuel to electricity, and other commodities presents a compelling reason for this chamber to conduct a review of the impact of implementation of the TRAIN law against the standard of living of the Filipinos,” Alejano said.
“It is also important to assess how we can improve the efficiency of the agencies of the government, which are mandated to generate revenue for the continued delivery of services and to initiate development in order to prevent the government from further initiating policies that would harm and cause additional burden to the people,” he added.
The lawmaker cited Pulse Asia’s March 2018 Ulat ng Bayan Survey, which showed that controlling inflation is among the top national concerns of Filipinos.
House Resolution No. 1838 urges the appropriate House committee to conduct an immediate review of the TRAIN law and recommend policies that would mitigate its impact on the poor.
The TRAIN law imposes higher excise taxes on sweetened beverages, oil, vehicles and cigarettes to compensate for reduced personal income tax rates.
The Philippine Statistics Authority earlier reported that headline inflation accelerated to 4.5 percent in April 2018, higher than the previous month’s 4.3 percent and the 3.2 percent in April 2017.
Last month’s figure brought year-to-date average to 4.1 percent, slightly above the full-year target of 2 percent to 4 percent.
Socioeconomic Planning Secretary Ernesto Pernia said he expects the current surge in inflation, which is due in part to an overhaul in the taxation system, to be temporary and will normalize towards the end of the year.
“The current surge in inflation is partly an initial reaction to the implementation of TRAIN and is expected to be short-lived and should taper off over the coming months,” Pernia said.
He also attributed the higher inflation to the slew of world oil price increases and the depreciation of the peso.
