How the government plans to help poor Filipinos affected by TRAIN

MANILA, Philippines — Are the government’s “social mitigating measures” enough to shield the poor from higher commodity prices triggered by the tax reform law?

On Tuesday, December 19,President Rodrigo Duterte signed Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act into law, which aims to generate revenue to fund a multibillion-dollar infrastructure program that is central to the government's economic agenda.

The TRAIN law is the first package of the administration’s much-awaited Comprehensive Tax Reform Program.

It took effect on January 1.

EXPLAINER: How Duterte's new tax law can affect you

The tax reform program will increase take-home pay for most wage earners, compensating for the lost revenue through excise taxes on fuel, cars and sugar-sweetened beverages, among others.

The bill, according to the president himself, had met “rough sailing” before it reached his desk, with some lawmakers criticizing certain “anti-poor” provisions of the bill.

Meanwhile, just days after the fresh law’s implementation, left-leaning, opposition solons in the House of Representatives vowed to bring Duterte’s TRAIN law before the Supreme Court.

To cushion the effects of the added duties on poorer households, Section 82 of the TRAIN act has identified three social mitigating measures.

The same section of the tax reform law also pointed out that qualified beneficiaries of the government’s social benefits will be identified using the National ID system, which the Senate was targeting to pass in the first quarter of 2018.

Under the TRAIN law, the beneficiaries could enjoy these benefits provided that the grants would not be availed in addition to any other discounts.

Unconditional cash transfer

Aside from the recipients of the Pantawid Pamilyang Pilipino Program (4Ps), a monthly cash grant would also be given to minimum wage earning beneficiaries of the National Household Targeting System for Poverty Reduction and to beneficiaries of the social pension program.

The unconditional cash transfer would amount to P200 a month for the first year of the act’s implementation, and P300 a month for the second and third year.

While the 4Ps has positive achievements, it is not without its flaws.

Citing “leakages” in the system, the Commission on Audit in October last year recommended to the Department of Social Welfare and Development to suspend the expansion of 4Ps.

“Upgrading the IT systems is also crucial in ensuring that unauthorized release of grants will be avoided,” state auditors said.

“The upgrades must focus on ensuring the reliability of the database since data issues, such as duplicate entries, had already prevented 25,000 deserving household from receiving grants in the accumulated amount of ?335,485,000.00,” it added.

Fuel vouchers to qualified PUJ franchise holders

Although the TRAIN law did not elaborate on the implementation of the granting of fuel vouchers to PUJ franchise holders, the Department of Finance in March last year said it was eyeing the revival of 2011’s “Pantawid Pasada Program,” which would provide cash cards to public utility vehicles to lessen the impact of higher excise taxes on petroleum.

To recall, several transport groups had complained that the Pantawid Pasada Program was not enough to mitigate the effects of oil price hikes months after the measure was first implemented. They also raised concerns over delays in the reloading of cash cards.

Fare discount, reduced price of NFA rice, free skills training for poorest 50 percent

Minimum wage earners, the unemployed, and the poorest 50 percent of the population, would have a 10-percent discount from all PUVs except trucks for hire and school transport service.

The same set of beneficiaries could likewise buy National Food Authority rice from “accredited” retail stores in the amount equivalent to 10 percent of the net retail prices, up to a maximum of 20 kg per month.

They could also avail skills training under a program implemented by the Technical Skills and Development Authority for free.

'Transitory' price hikes

In a bid to allay concerns over the act’s impact on prices of basic goods, Bangko Sentral ng Pilipinas Monetary Board member Felipe Medalla said there is no need for any response from the central bank as inflationary effects of the TRAIN law would be “transitory.”

Medalla estimated inflation to go up by 1 percent next year and 0.5 percent in 2019 because of the tax reform law. But over the long term, he said the TRAIN law should temper inflation as more infrastructures will be built.

He also said the government’s cash grant program and the lifting of quantitative restrictions on rice imports, which could slash the retail price of rice by P7, would shield the poor from the sting of higher commodity prices.

“You must remember that the long-term effect of TRAIN is different from short-term effect,” Medalla told a press conference last December.

“The long-term effect is actually anti-inflationary to the extent that the infrastructure will reduce transportation costs and increase productivity... In the long run, TRAIN should reduce the inflation rate,” he added.

READ: Winners and losers: How the TRAIN law affects rich, poor Filipinos