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Drilon wary of impact of tax reform on poor

Senate Minority Leader Franklin M. Drilon on Friday reiterated his concerns over the administration's ability to protect the poor from the inflationary effect of the proposed tax reform program.

"Let's face it, the proposed tax reform package will really have adverse effects on the poorest of the poor. The impact may be temporary but what is clear is that next year Filipinos will be hit by this proposal," Drilon said at a recent hearing of the Senate ways and means committee on the Tax Reform for Acceleration and Inclusion Act (TRAIN).

"I have very serious concerns over the ability of the government to protect the poor from the impact of the proposed increase in the excise tax on fuel. It is the poor and low-income earners who will be hit the most by inflation," Drilon said.

"The prices of commodities continue to increase, even without the proposed excise tax," he added. "The inflationary effect of the tax reform program will add to the burden."

While the TRAIN provides for a set of subsidies for marginalized and vulnerable sectors to cushion the effect of the proposed higher excise tax on fuel including a direct cash transfer of P200 per month to some 10 million families, Drilon said "the implementation of it will prove challenging for the administration."

"It's good when you see it in the budget but whether or not it can be implemented is something that is very doubtful," said Drilon, adding that even the economic managers are still scrambling as to how it will be implemented.

He recalled that even the Department of Social Welfare and Development has registered some reservations particularly on its ability to implement the cash transfer program to 10 million families, as its hands are already full with the implementation of the Pantawid Pamilyang Pilipino Program that has 4.4. million families as beneficiaries.

Given the inflationary effect of the tax reform program, Drilon said that P200 monthly subsidy might not be enough to help the poor deal with high inflation next year, citing estimates made by the Bangko Sentral ng Pilipinas that inflation may reach anywhere between 3.2 to 3.8 percent in 2018 from the projected 3.2% in 2017.

Drilon also cited a study conducted by the Philippine Statistics Authority (Family Income and Expenditure Survey) saying that the poorest 30 percent of the households spend P8,917 a month -59.7 percent of their income for food, 4.5% for transportation, and 7.2% for electricity.

Although the DOF claims that increase in the prices of commodities will not be very significant, any increase will be felt by the poor. "To them, every peso counts," he added.

He said that when prices of goods, commodities and electricity increase as a result of excise taxes on fuel, the poorest 30 percent will be forced to tighten the belt further to meet their spending requirements.

"The poor's monthly expenditures will increase by several hundred pesos which makes much difference to a poor family. It is not insignificant," Drilon said.

"It is thus crucial for Congress to assess the sufficiency of these mitigating measures in order to ensure that welfare of the poor and marginalized will not be compromised," Drilon concluded.

Source: Senate of the Philippines

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