More Filipinos dragged into poverty by higher taxes under TRAIN

The higher excise slapped on oil products and other goods and services under the Tax Reform for Acceleration and Inclusion (TRAIN) Act pulled more Filipinos into poverty, according to state-run think-tank Philippine Institute for Development Studies (PIDS).

“The results show that although excise taxes on fuel products entailed minimal increase in poverty incidence, the first package of TRAIN increased poverty among households and individuals and across all sectors considered. This was due to the increase in commodity prices that offset the increase in factor incomes,” according to researchers Czar Joseph Castillo, Ramon Clarete, Marjorie Muyrong, and Philip Tuaño in a report titled “Impacts of TRAIN fuel excise taxes on employment and poverty.”

Nonetheless, the UCT [unconditional cash transfers] for households at the bottom 50 percent provided by the TRAIN mitigated the increase in poverty, the report added.

In a separate report titled “Effects of TRAIN fuel excise taxes on goods and prices,” the same authors said: “While the goal of the TRAIN as a tax reform law is very commendable, which is to raise public revenues to improve the delivery of basic services and improve social and economic outcomes in the future, there are considerations that the government should make in designing tax policy.”

The authors’ calculations showed that from the computed poverty rate baseline of 16.48 percent among households, the higher petroleum and coal excise under TRAIN added 0.16 percentage point (ppt) to the poverty rate.

The entire TRAIN law, which besides fuel also slapped higher or new excise on sugar sweetened beverages, vehicles and cosmetic procedures, among other goods and services, was estimated to have had hiked poverty incidence by 1.72 ppt.

But with the unconditional cash transfers under TRAIN, the increase in poverty incidence was minimized to only 0.26 ppt.

Across vulnerable sectors, the most affected by the higher oil excise were transport workers, while the entire TRAIN law increased the poverty rate the most among fisherfolk.