Gov’t claims TRAIN has ‘little’ impact on inflation; uptick due to other factors

Published March 1, 2018, 12:00 AM

by manilabulletin_admin

By Chino S. Leyco

The newly implemented tax reform law has “little” contribution to the recent spike in the rate of increase in consumer prices, the government’s key economic agencies and prominent economists said.

Officials of the Department of Finance (DOF), Bangko Sentral ng Pilipinas (BSP), and National Economic and Development Authority (NEDA) along with the country’s leading economists were in consensus that several factors have pushed inflation up in January this year.

Finance Undersecretary Karl Kendrick T. Chua said that among the factors affecting the country’s inflation were the increase in the prices of crude oil in the international market and weakness of the peso against the US dollar.

According to government and private sector economists present during a recent Senate hearing, the tax reform for acceleration and inclusion act (TRAIN) has little to do with inflation.

In particular, Socioeconomic Planning Secretary Ernesto M. Pernia noted that based on the NEDA’s calculations, only 0.7 percent of inflation for this year is attributable to the effects of the TRAIN law.

NEDA, on the other hand, took note of the rise in the price of rice which accounts for around 22 percent of the consumers’ basket.

“We have to closely monitor the buffer system of rice to ensure that there is no considerable spike in the price of rice,” Pernia said.

Socioeconomic Planning Undersecretary Rosemarie G. Edillon also attributed the increase in the prices of food commodities such as corn and meat to typhoons that hit the country in December last year.

“Part of the reason for the recent inflation is expectations that the tax reform will indeed increase prices. These inflationary expectations can be tempered by further increasing the supply of goods and services,” Edillon said.

“This can be done by encouraging more investments or for existing firms to expand production.  For these, the second round of tax reform, or TRAIN 2, is critical. This should be accompanied by the passage of the ease of doing business law,” she added.

Pernia, meanwhile, said it was also possible that certain merchants have taken advantage of the situation by raising the prices of their goods prematurely.

“It was so easy to point a finger at TRAIN,” Pernia pointed out.

With the active lead of the Department of Trade and Industry, the government should be forceful in going after businesses manipulating the prices of goods to the disadvantage of the public, Pernia added.