Economic experts cautions TRAIN can hand over serious effects to economy

Jhazzie P. Basit | January 10, 2018

Last Saturday economic expert Ibon Foundation Executive Director Sonny Africa denounced the government’s downplaying of the effects of the Tax Reform for Acceleration and Inclusion (Train) Law, warning that the measure could bring drastic effects to the economy.

Africa broached the Department of Finance’s (DOF) assertion that the law would only have a minimal impact to the economy.

According to Africa, 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 Africa’s statement during a news forum at Annabel’s Restaurant in Quezon City, he mentioned that in these two years, on the basis of one tax measure alone on oil products, the inflation rate increased, the prices of basic goods and services increased making it very unfair for the government to say that this has no effect to the Philippine economy.

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.

“The Palace, which earlier admitted that the prices of basic commodities would “increase,” had described them as “minimal” and “temporary” but in the long-term would enable the government to better help the poor.

Think tank IBON Foundation however, believes that excise taxes on petroleum were proven to be very inflationary in the past, and downplaying their impact on the prices of basic commodities is very “dishonest” and “insensitive.”

“It’s about time for them to become more transparent and upfront about the negative impact of TRAIN on the poorest 15-million Filipino families. These are tens of millions of Filipinos who do not get any personal income tax cuts but will pay higher prices for the goods and services they consume from already very low incomes,” he said.

Africa also said that government’s harping on the cash transfers for the country’s poorest families is an indirect admission that the TRAIN’s taxes do put an additional burden on them.