DOF: Editorial cartoon ‘inaccurately’ depicts TRAIN 2, fuel tax

It has come to the attention of the Department of Finance that an editorial cartoon published last Jan. 23 suggested that the recent oil price hike and TRAIN 2 are detrimental to the interests of the Filipino people:

In response, allow us to share the following points:
TRAIN 2. The second package of the Duterte administration’s Comprehensive Tax Reform Program (Tax Reform for Acceleration and Inclusion 2 or TRAIN 2) is still going through the legislative process. The approved House bill, renamed Tax Reform for Attracting Better and High-quality Opportunities (Trabaho), by the House committee on ways and means, has two key features.

The first is a gradual reduction in our country’s corporate income tax rate, the highest in the Asean region, from 30 percent to 20 percent. This feature aims to increase the investment competitiveness of the Philippines vis-à-vis our neighbors. By lowering tax rates, this proposal is hardly inflationary, while creating an estimated 1.4 million jobs over 10 years as firms expand and hire more workers with additional money at their disposal.

The second is a rationalization of the investment incentive reform system. Tax incentives are a social investment. Every peso given up as an incentive must benefit society in the form of better jobs, faster innovation and countryside development. The bill aims to support priority activities with tax incentives that are performance-based, targeted, time-bound and transparent.

As the proposed TRAIN 2, or Trabaho bill, is currently pending in the Senate and has not yet been signed into law, how could it even remotely do what the cartoon depicts? In stark contrast to the image in the cartoon, TRAIN 2 has been specifically designed to support hundreds of thousands of Filipino micro, small, and medium enterprises and encourage job creation.

Second tranche of the excise tax on fuel. If the cartoon meant to refer instead to the second tranche of the excise tax on fuel under the TRAIN Law, a survey of retail pump prices shows that they are currently below pump prices in January 2018, before the first tranche of the oil excise was implemented, and way below last year’s peak in pump prices.

On Jan. 17, 2019, average prices of gas and diesel, both in pesos per liter, were 49.94 and 40.14 respectively, while the corresponding figures in the month of January 2018 were 51.81 and 40.45. In October 2018, prices of gas and diesel averaged P58.79 and P47.99 per liter.

Given that the pump prices today are lower than their levels last year, publishing the editorial cartoon at this time is misleading, as its contents are not supported by facts.

Broader inflation story. The economic managers have taken concrete and effective steps to lower the elevated inflation rate, which has been a source of pain for all our citizens. We have repeatedly reported that the TRAIN Law contributed 0.4 to 0.7 percentage points of the average annual inflation rate of 5.2 percent in 2018. The government remains committed to managing inflation, especially by attacking its real causes that are under our control, such as food supply issues.

Government efforts to boost food supply and the cumulative interest rate hike of 175 basis points since May 2018 have successfully decreased inflationary pressures. Official statistics post negative month-on-month inflation rates over the past two cycles.

Nevertheless, the Duterte administration will continue to keep a watchful eye on inflation.

We hope that the Inquirer will recognize and find ways to animate what the evidence and data are really telling us: that fixing an unfair and ineffective tax system and the priority actions taken to address inflation, following presidential directives, are working in ways diametrically opposed to what the cartoon seeks to inaccurately depict.

ANTONIO JOSELITO G. LAMBINO II,
assistant secretary,
Department of Finance