DBM allots P28.8 B to offset TRAIN impact on inflation

By Mary Grace Padin


Budget Secretary Benjamin Diokno File

MANILA, Philippines — The Department of Budget and Management has allocated about P28.8 billion for various programs to cushion the impact of the Tax Reform for Acceleration and Inclusion Act (TRAIN).

 In a statement, Budget Secretary Benjamin Diokno said the government has incorporated mitigating measures in the 2018 budget to offset the expected uptick in  consumer prices brought about by the passage of TRAIN as well as the Tax Reform Cash Transfer Project, loan facility for the public utility vehicle (PUV) modernization program, and the National ID System.

“We laud the passage of Package 1A of TRAIN insofar as it supports the administration’s socio-economic agenda. It will raise the necessary revenues for our much-needed Build Build Build program and social services initiatives,” Diokno said.

“Nevertheless, we are aware of the short-term and transitory effects of TRAIN on consumer prices, which is why the government incorporated these mitigating measures in the 2018 budget,” he added.

DBM has set aside P24.5 billion for the unconditional cash grants to the poorest 50 percent households identified by the Department of Social and Welfare Development. The allocation is lodged in the budget of the Land Bank of the Philippines.

Under this program, over 10 million Filipino households will receive P200 a month this year. This will increase to P300 per month per household in 2019 and 2020.

“The unconditional cash grants will more than offset the short-term inflationary impact of TRAIN. This is in response to critics who say that TRAIN is anti-poor because the informal sector and already tax-exempt wage earners will be faced with higher excise taxes,” Diokno said.

 About P2.3 billion was also allocated for the loan facility to be extended to PUV drivers for the replacement of old public utility jeepneys with safer, more comfortable and more economic PUVs.

The fund is lodged in the budgets of the Land Bank and the Development Bank of the Philippines (DBP), and its use will be subject to guidelines set by the Department of Transportation (DOTr), the DBM said.

About P2 billion has also been earmarked for the implementation of the National ID System, which will ensure that government programs and services are delivered to their intended beneficiaries.

The National ID system is seen to limit the leakages in the delivery of social services, particularly the cash transfer programs of the government.

The inflationary effects of the tax reform law are projected to be temporary.

Citing estimates, he said the TRAIN may boost inflation by 0.85 to 1.2 percentage points in 2018 and 0.4 to 0.55 percentage points by 2019.

However, this is seen to be countered by the lowering of rice prices brought about by the proposed removal of quantitative restrictions on rice imports.

 The DBM said this could lower inflation by about 1.14 percentage points annually.

 “The inflationary effects of TRAIN are projected to be temporary, aside from being countered by lower rice prices with the removal of quantitative restrictions. This is why the BSP maintained its inflation target at two to four percent, and approved by the DBCC last December 2017,” he said.

“In the long-term, TRAIN should even lead to lower prices as it will result to better productivity and lower transportation costs with superior infrastructure,” Diokno added.


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