Tuesday, September 25, 2018
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Corporate Securities Info

TRAIN law can use a second look

Congress is back in session.

Unless called to a special session by President Duterte, it will adjourn sine die on June 1 and reconvene on July 24 to hear his third State-of-the-Nation Address.


The legislative calendar for those two weeks is full. For one, Speaker Pantaleon Alvarez has promised Mr. Duterte to expedite the impeachment of Chief Justice Maria Lourdes Sereno as soon as the House of Representatives resumes its session. The debates on this action may take two to three days.

In the Senate, the bill on the enactment of a Bangsamoro Basic Law (BBL) is in the final stages of its deliberation. Considering its serious ramifications on the existing political order, it is doubtful though if the senators would be able to approve it on final reading in a week’s time.

Besides, once approved by the Senate, the two chambers may have to convene a bicameral conference committee to iron out possible differences in their approved versions.

Under these circumstances, it is reasonable to assume that no substantive legislative measure other than Sereno’s impeachment and the proposed BBL would be discussed by the legislators.

This means, the second phase of the administration’s tax reform agenda would have to await the resumption of congressional sessions after the President’s Sona in July.

Since the sequel to the TRAIN law is a revenue measure, it has to emanate from the House. As the bill aims to modify existing corporate tax structures, it is expected to undergo close scrutiny at the committee level.

With time on its hand, the Department of Finance (DOF) has the opportunity to take a second look at the initial phase of the Tax Reform for Acceleration and Inclusion (TRAIN) Act that, among others, increased the tax on oil-based products and some commodities that are regularly consumed by many Filipinos.

Prior to the enactment of the TRAIN law, the DOF, Department of Trade and Industry (DTI) and National Economic and Development Authority (Neda) downplayed the concerns expressed by some lawmakers that the additional taxes would result in a spike in the prices of basic commodities.

The DTI said higher transportation costs would have minimal effect on the prices of goods and, if at all, the increase in prices would only be in the range of 15 to 20 centavos.


The Neda supported the DTI’s rosy prediction and said the inflation that might result from the adjustments would be temporary and manageable in the long term.

Fast forward, the textbook analyses of DTI and Neda turned out to be duds. The additional taxes pushed the prices of basic commodities and the inflation rate in February, one month after the implementation of the TRAIN law, to a three-year high of 4.5 percent.

According to the Philippine Statistics Authority, this is the fastest the country’s inflation has risen since August 2014 when the inflation rate was 4.9 percent.

The administration’s financial advisers were hard-pressed explaining the “unexpected” turn of events. They pointed to factors other than the TRAIN law, e.g., depreciation of the Philippine peso against the US dollar and higher crude oil prices, for the failure of their optimistic prophesies to come true.

The flip side of this development is the record increases in tax collections by the Bureau of Internal Revenue and Bureau of Customs.

And so we have a grotesque situation of the government coffers overflowing with money, while the majority of the Filipinos have to practically empty their wallets to cope with the higher cost of living.

Whatever extra money they got from the reduction of their income taxes went back, and more, to the government. It’s like robbing Peter (the taxpayers) to pay Paul (the government).

While taxes are considered the lifeblood of the government, that does not justify the government extracting it from the taxpayers in a manner that may lead to the latter’s financial (and physical) ruin.

When the interests of 99 percent of Filipinos are involved, there is no shame in admitting errors in the implementation of certain national policies.

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TAGS: Business, Congress, Duterte, TRAIN Law
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