We understand why President Duterte’s economic managers are scrambling to keep Congress from suspending the tax reform program they worked so hard to put in place.
The administration’s ambitious Build, Build, Build program—which aims to spur economic development by addressing the woeful, years-long neglect of the country’s infrastructure needs, creating 1.1 million new jobs yearly, and reducing poverty from 22 percent to 14 percent by 2022—comes with a hefty P8-trillion price tag.
The government’s Tax Reform for Acceleration and Inclusion (TRAIN), which raises government revenues while cleverly disguising itself as a measure to lower personal income taxes, is the vehicle that pays this price.
Unfortunately, TRAIN has actually raised the cost of living by removing value-added tax exemptions and increasing excise taxes on fuel, automobiles and sweetened beverages.
While it is arguable that higher taxes on automobiles target only the middle class and the rich, the same cannot be said for the expansion of the VAT base and the tax on fuel, which affects everybody, including the poor.
Even before world oil prices began to spike, the higher cost of fuel as a result of TRAIN raised the operating costs of a myriad of businesses that were not shy about passing on the cost to consumers. Valid or not, TRAIN became a convenient scapegoat for higher prices everywhere.
In the face of rising criticism, the administration’s defense of TRAIN has not been all that effective.
An attempt by the National Economic and Development Authority to show that a family of five could get by on a budget of P10,000 a month was a public relations disaster that portrayed government officials as being callous and disconnected from reality.
Nor did it help to hear Budget Secretary Benjamin Diokno urging Filipinos not to be “such a crybaby” over higher prices because we had suffered more serious bouts of inflation before. More recently, Diokno defended TRAIN by blaming the “incompetence” of the National Food Authority for the recent rise in inflation.
None of this, valid or not, really helps.
The truth is that Filipino consumers are suffering from high prices and the administration needs to stop denying or sugarcoating the situation. If there are proposals to alleviate the pain without compromising the ultimate goal, the President’s economic team should be open-minded enough to seriously consider them.
Finally, the government must keep the public eye focused on the goal, and remind everyone that the shared suffering will eventually pay off.
Ahead of a meeting of finance ministers and central bank chiefs, the director general for Southeast Asia of the Asian Development Bank gave that goal a ringing endorsement.
“I have been in ADB Manila for the last 20 years and I have not seen a momentum on the government side for infrastructure development as we’ve seen in the last two years,” said Ramesh Subramaniam.
“Given the efforts that the government has put in and the confidence of the nation to the Build, Build, Build program and how the key departments and the economic cluster are working together, we are very confident that the program is on a good foundation,” he said.
The government shouldn’t be focused merely on defending every aspect of TRAIN, but convincing us that the pain will be short term and that the gains at the end will be well worth it.