Economic expert warns Train can deliver negative effects to economy

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An economic expert criticized on Saturday the government’s downplaying of the effects of the Tax Reform for Acceleration and Inclusion (Train) Law, warning that the measure could bring dire effects to the economy.

Ibon Foundation Executive Director Sonny Africa took a swipe at the Department of Finance’s (DOF) “deceitful” pronouncements that the law would only have a slight impact to the economy.

Africa pointed out that inflation rose and gross domestic product (GDP) growth slowed down in the last two rounds of oil tax increases: in 1996, when the government imposed for the first time the excise tax on oil; and in 2005, when the expanded value-added tax (E-VAT) was implemented.

“In these two years, on the basis of one tax measure alone on oil products, tumaas ang inflation rate, tumaas ang prices ng basic goods and services (the inflation rate increased, the prices of basic goods and services increased.) So I think it is very unfair for the government to say na walang epekto to (that this has no effect),” Africa said during a news forum at Annabel’s Restaurant in Quezon City.

Citing government data, Africa said that inflation rate increased from 8 percent in 1995 to 9.1 percent in 1996; and GDP growth went down from 5.8 percent in 1996 to 5.2 percent in 1997.

GDP growth, on the other hand, went down from 6 percent in 2004 to 5.1 percent in 2005 when the E-VAT was implemented.

“It doesn’t make sense. Kasi kung walang epekto, ibig sabihin, walang kikitain ang gobyerno (If there is no effect, that means, the government will not earn anything). So I think it is self-contradictory for the DOF to say na walang epekto ‘to kasi (it has no effect because) if the government wants to generate revenues, it comes from somewhere, revenues come from people’s pockets,” he added.

Tax the rich more

Africa said that the government is using the lowering of income taxes as a “smoke screen” the actual effect of the Train Law to the majority of the population.

He explained that the government’s revenue losses from income tax exemption would be shouldered by the poorest 15 million Filipino families.

“’Yung reality ng Train nagbibigay siya ng income tax benefits maybe, at most, to six to seven million Filipinos pero pinapatawan ng taxes all 23 million Filipino families. Ibig sabihin the poorest 15 million Filipino families na wala namang income tax benefits will pay higher taxes,” he added.

(The reality of Train is it gives income tax benefits maybe, at most, to six to seven million Filipinos but imposes taxes on all 23 million Filipino families. That means the poorest 15 million families that have no income tax benefits will pay higher taxes.)

Instead of imposing higher taxes to the general public, the government should improve its collection of corporate income tax, which is about P300 to P400 billion annually according to the National Tax Research Center (NTRC), Africa said.

“I think kung icocompute talaga ‘yung (if we’re going to compute the) amount of economic activity, amount of potential revenues, ang laki at ang clear ng gap (there is a huge and clear gap) between actual collections and potential revenues,” he added.

The expert also pushed for higher tax rates to the country’s richest families, saying that a mere additional 10 to 20 percent income tax could generate an additional P90 billion in revenues, according to Ibon Foundation’s computation.

“Just taxing the richest 20 percent families a little bit more, pwede siya kumita ng P90 billion. Para sa amin, ‘yung tamang tax system sa Pilipinas ay dapat bumatay doon sa hindi pagiging pantay ng income at assets ng mga tao,” Africa said.

(The government can earn P90 billion. For us, the just tax system in the Philippines should be based on the uneven income and assets of the people.) /jpv

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