Tax reform bill blamed for rising cost of living even as inflation decelerates

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By Lara Climaco | FilAm Star Correspondent

While headline inflation hit a seven-year high last month at 4.6 percent, Budget Sec. Benjamin Diokno pointed out that the trend this year is actually decelerating and would continue to ease for the rest of the year.

The month-on-month inflation rate has dropped from 0.7 percent in March to 0.3 percent in April and hitting a low of 0.2 percent in May, the Department of Budget and Management (DBM) noted last week.

“We expect this to further taper in the second half of the year,” Diokno was quoted in an agency press release.

The drop will result from decreasing world crude prices and augmented buffer stocks of rice. In a joint statement on the May 2018 inflation report, government economic managers noted that global prices are expected to soften with major oil exporting countries discussing the possibility of increasing production. This would cut the cost of the country’s oil imports and pump prices. The Department of Energy’s plan to import diesel from non-OPEC countries and arrangements with local fuel retailers to provide discounts for public utility vehicles would likewise temper costs. Meanwhile, large tranches of rice imports expected to arrive starting month would make food cheaper for Filipino families, according to the joint statement issued by Diokno, Finance Sec. Carlos Dominguez III and National Economic and Development Authority (NEDA) Director-General and Socioeconomic Planning Sec. Ernesto Pernia.

Joining netizens outraged by NEDA’s initial claim that a typical Filipino family could live on PHP 10,000 per month, senators once again assailed the troubling impact of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, which is being blamed for surging local prices.

“Kung titingnan niyo po, presyo, trabaho, ito ang No. 1 at No. 2 issues ng taumbayan. Honestly, every week ako nagiikot sa iba’t ibang parte ng Pilipinas. This is the No. 1 issue, it’s not the West Philippine Sea, it’s not the judiciary, it’s not the kiss of President Duterte. Iyon mga iyon, napag-uusapan lang iyan dito sa media, pero pagpunta mo sa mga komunidad, ang pinag-uusapan nila, presyo ng bilihin, di na nila kayang tustusan ang kanilang gastusin,” Sen. Bam Aquino said in a media interview last week.

Aquino has filed a bill seeking the suspension of TRAIN, which he said already has the support of eight or nine senators. He thinks that TRAIN 2, the second package of the tax reform program that seeks to rationalize investment incentives, should be placed on the backburner until hitches in the implementation of TRAIN are ironed out.

Government economic managers have taken pains in explaining that TRAIN only contributes 0.4 percentage points to inflation or 9 centavos for every additional peso spent due to inflation, as opposed to the 0.7 percentage points or 15 centavos more for every peso, owing to external and other domestic factors such as rising crude prices and rice supply. They insist that TRAIN is needed to finance the massive infrastructure build-up that would make the Philippines competitive internationally, which then would improve the quality of life in the country. The Duterte administration expects to spend about PHP 8 to 9 trillion until 2022 for its ambitious Build program.

“We, the economic managers of the Duterte Administration, reiterate the government’s unwavering commitment to improve the lives of the Filipino people and bring lasting change to our country. The administration is steadfast in the conviction that we can build a prosperous, high-income economy with a predominantly middle-class society by 2040.

Toward this objective, our economic program must generate the required resources so that we can continue to make investments in our people’s health and education, security and public order, and to build world-class infrastructure,” according to their joint statement.

“Staying the course will not always be easy but we owe it to our people, our children, and future generations. We know that we are going through a challenging period. The government is closely monitoring and taking steps to address the difficulties experienced by Filipino families today arising from higher prices,” they added.

TRAIN 2 is not likely to sail through the Senate as easily as TRAIN did last year because more price increases are already programmed over the next few years.

“Isipin mo, in January of 2019, may isa pang round iyan ng pagtaas ng presyo. Akala ng mga tao, TRAIN 2 iyan. Hindi po, TRAIN 1 pa rin iyan. In January of 2020, may isang round pa iyan ng pagtaas ng presyo. Papayag ba tayo na napakataas na, dadagdagan pa natin? I don’t think it’s logical. Sa akin, sana ma-tackle muna natin ang pag-suspend, pag-rollback, bigyan natin ng kaunting lunas ang mga tao. Then in that atmosphere, we can start tackling TRAIN 2 na mas maayos at makita natin ang balance na hinahanap ng ating mga industriya,” Aquino said.

Sen. Win Gatchalian has filed a bill seeking to lift quantitative restrictions on rice imports.

The move is expected to ease retail prices of the staple commodity by as much as PHP 8 per kilo and result in savings of up to PHP 3,600 for households consuming an average of 450 kilos per year. Government economic managers often cite this as an immediate solution to inflation woes.

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