Monday, June 25, 2018
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TRAIN is not to blame

People are worried about the rising prices of things they buy—and it is a concern. But the Tax Reform for Acceleration and Inclusion (TRAIN) Law is not the primary reason. So blaming TRAIN or, worse, canceling it won’t reduce inflation. It certainly won’t roll back prices. It would just result in a lack of the infrastructure and better social services we urgently need.

It might seem I’m harping too much on TRAIN, but this is a major reform that has to be done. Quite simply, it will make the Philippines a more attractive place to invest. That will mean more jobs, and more money to pay for better jobs.

Because of TRAIN, there will come a time when you’ll be able to get to work in under an hour. With TRAIN, government can afford free education for your kids, and healthcare for you and your family. Without TRAIN, it can’t, or must go into debt that will threaten the country’s fiscal stability. To stop TRAIN now would be a mindless mistake.

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TRAIN only added 0.4 percentage points to the 4.5-percent inflation in April; that’s when people started to complain about rising prices. But those who have a job and earn P250,000 and below per year now pay no tax, when before they did. Those earning more now pay less, and so can afford some higher prices.

The poor buy very little, and almost all of what they buy is not taxed under TRAIN. To cover the little that is impacted, they now get P200 per month to cover that increase. That costs the government P2.5 billion.

Rice accounts for around a fourth of the poor’s budget — a significant portion. And the price of rice has gone up by around 10 percent compared to prices a year ago. That (or a miniscule amount at most) was not due to TRAIN. It was due to the National Food Authority’s admission of low rice inventory, which raised unnecessary panic and, with it, prices. If the NFA can be taken out of the trading of rice, as I’ve long argued, and a reasonable tariff applied in an open market, the price of rice will go down.

Fish is in short supply due to weather-related factors that contributed to low productivity, so prices have risen. Vegetables, meanwhile, account for 5 to 7 percent of the poor’s budget. All these products are exempt under TRAIN. As is 3-in-1 coffee, which most of them consume.

Their electricity comes under the lifeline program. Poor households consuming less than 100 kwh per month don’t pay as they are subsidized by the government.

The energy department has already made arrangements with oil firms to provide discounts to public utility vehicles, while the transportation department is finalizing guidelines for subsidies and vouchers for franchised public vehicles. They need to move faster on this, though.

TRAIN has, indeed, increased the cost of some things. Cigarettes, for instance (which raised P3.7 billion toward a better life for all of us). But are we going to complain about that? Or sugary drinks (at P2.5 billion)?

The only one that can be questioned is fuel. The TRAIN Law applied an excise tax of between P2 and P3 on gas and diesel. The real blame, though, lies with international oil prices and the depreciating peso. These have caused crude oil prices to rise by P7 to P10 per liter — triple the impact of TRAIN.

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The poor don’t spend directly on gas or diesel. They walk, or might use public transportation. There have been no fare increases for tricycles or jeepneys, although there are calls for such fare hikes.

Let’s put the blame where the blame lies: international price movements, supply shortages and unscrupulous, even heartless traders using TRAIN as an excuse.

Don’t get me wrong, I’m as sympathetic as anyone to the plight of the poor. And I’ve fought for their betterment for years. But I also look at facts dispassionately. I try to avoid emotionalism. The facts are that the poor are not negatively impacted by TRAIN, except in a very minor way.

As for the rest of us, inflation has always been among the top concerns of the public, regardless of the inflation rate. But net incomes have risen to help cover that rise.

The bottom line is, almost everyone will benefit from TRAIN as the infrastructure we desperately need gets built. Even in the short term, the poor get their cash transfer, and the middle class gets more take-home pay.

Stopping TRAIN won’t solve anything.

E-mail: wallace_likeitis@wbf.ph

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TAGS: Like It Is, Peter Wallace, tax reforms, train
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