TRAIN revenues, infra investments seen to ease poverty
If the infrastructure investments as a result of the higher revenue generated under the Tax Reform for Acceleration and Inclusion (TRAIN) Act are included in the picture, the first tax package will ultimately cut poverty incidence, the Department of Finance said.
Reacting to two policy notes published by state-run think-tank Philippine Institute for Development Studies this month, which claimed that the higher excise taxes slapped by the TRAIN law since last year resulted in “increased poverty among households and individuals,” the DOF sent to reporters a copy of De La Salle University-Angelo King Institute for Economic and Business Studies’ (DLSU-AKI) latest policy brief, which also assessed the TRAIN law’s performance since last year.
Authored by Virginia Polytechnic and State University’s Caesar B. Cororaton and DLSU School of Economics’ Marites M. Tiongco and Justin S. Eloriaga, the study titled “Assessing the Potential Impacts of the Tax Reform for Acceleration and Inclusion and the Build Build Build Program” said results suggested that TRAIN had prompted additional revenue for social programs and infrastructure spending.
“There are clear increases in the capital stock which drive economic growth with the industry sector leading the way and the services and agricultural sectors lagging behind. With regard to the inflationary effects, we can see that the additional excise taxes increase inflation in 2018 and 2019 but decelerates later as higher growth would significantly dominate the inflationary effects,” the study read.
Also, it said that results of the poverty and distributional micro simulation showed that the policy had reduced poverty and income inequality slightly.
Estimates showed that poverty incidence declined to 21.053 percent from the baseline level of 21.503 percent with the TRAIN law in place.
In May, Finance Undersecretary Karl Kendrick T. Chua said that “tax reform has always been a package, and any analysis of the impact of the tax package must look at the entire reform, from the tax rates to the social mitigating measures and earmarked spending on infrastructure and social services, not just selected provisions.”
The TRAIN law jacked up excise on cigarettes, oil products, sugar sweetened beverages and motor vehicles, while slashing personal income tax rates.
The first half revenue from TRAIN hit P55.6 billion, higher than the P52.1-billion target.
