2018 budget to mitigate TRAIN price effects-DBM

The 2018 General Appropriations Act includes allocations for mitigating measures intended to offset the slight uptick in prices due to the Tax Reform for Acceleration and Inclusion.

In the 2018 Budget, a total of P28.8 billion has been earmarked for the Tax Reform Cash Transfer Project, loan facility subsidies for the Public Utility Vehicle (PUV) Modernization Program, and the implementation of the National ID System.

“We laud the passage of Package 1A of TRAIN insofar as it supports the Administration’s socio-economic agenda,” said Department of Budget and Management Secretary Benjamin Diokno.

“It will raise the necessary revenues for our much-needed Build Build Build program and social services initiatives,” he added. “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,” the Budget chief elaborated.

In particular, P24.5 billion is set aside for unconditional cash grants to the poorest fifty percent (50%) of households identified by the Department of Social Welfare and Development (DSWD) through the National Household Targeting System for Poverty Reduction (NHTS-PR). The said allocation is lodged in the budget of the Land Bank of the Philippines (LBP). For 2018, over ten million Filipino households will receive P200 a month to offset the slight increase in prices due to the higher excise taxes imposed by TRAIN.

“The unconditional cash grants will more than offset the short-term inflationary impact of TRAIN,” said Sec. Diokno. “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,” he said. “So aside from increasing the take-home pay of many workers with the reduced income tax rates, we will also augment the incomes of the poorest fifty percent of households,” he added. “More so, in 2019 and 2020, we will raise the subsidy to P300 per month per household,” said the DBM Secretary.

Even as TRAIN is seen to boost inflation by 0.85 to 1.2 percentage points in 2018 and by 0.4 to 0.55 percentage points by 2019, this is projected to be countered by the lowering of rice prices through rice policy reforms. The proposed removal of quantitative restrictions on rice could lower inflation by about 1.14 percentage points annually[1].

“The inflationary effects of TRAIN are projected to be temporary, aside from being countered by lower rice prices with the removal of quantitative restrictions,” said Sec. Diokno. “This is why the BSP maintained its inflation target at 2 to 4 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,” he noted.

Meanwhile, about P2.3 billion is allocated for the loan facility to be extended to PUV drivers to replace old public utility jeepneys with safer, more comfortable, and more economic PUVs. The use of the said funds, lodged in the budgets of the LBP and the Development Bank of the Philippines, respectively, will be subject to guidelines set by the Department of Transportation.

Lastly, P2.0 billion is also earmarked for the implementation of the National ID System. The said allocation is within the budget of the Philippine Statistics Authority (PSA), and will ensure that public resources are delivered to their intended beneficiaries. The National ID system will limit leakages in the delivery of social services programs, particularly the cash transfer programs of the government.

For more information on the Department of Budget and Management, visit: www.dbm.gov.ph and follow @DBMgovph on Facebook and Twitter. (DBM)