The government’s monthly financial aid of P200 to poor families is enough to protect them from the inflationary impact on consumer goods of the Duterte administration’s tax reform program, the Office of the Solicitor General (OSG) has told the Supreme Court.
The OSG gave the assurance as it urged the high tribunal to thumb down two petitions challenging the constitutionality of Republic Act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
Grim scenario
The amount, which will be distributed to more than 1.8 million poor households across the country, is roughly the average price of 5 kilos of well-milled rice, according to latest data from the Philippine Statistics Authority (PSA).
In a bid to convince the Supreme Court, the OSG presented a grim scenario for the country should the justices grant the separate petitions filed by the Makabayan party-list bloc and Laban Konsyumer Inc., both of which urged the tribunal to halt the implementation of the TRAIN law.
For one, the OSG said voiding the new tax law, which imposed higher excise taxes on oil, coal, sugary drinks, cigarettes and vehicles starting Jan. 1, would result in a revenue loss of P786 billion for the government in the first five years of its implementation.
This year alone, the government is projected to lose P146.6 billion in revenue, as the TRAIN law exempts individuals with an annual salary of P250,000 from paying income tax, the OSG said.
“The government and the public in general will greatly suffer if the TRAIN law is declared invalid,” it said in a 74-page consolidated comment that it submitted to the Supreme Court on April 19.
“[The] petitioners’ opinion that the TRAIN law will unduly burden the poor is inaccurate. The [financial assistance] for the poorest of the poor and the increase in take-home pay for wage earners will more than compensate them for the price increase that may be brought about by the TRAIN law,” the OSG argued.
It said exempting oil products from the new tax law would only lead to “lower budget and fewer investments on the government’s priority programs on infrastructure, health, education and other social services.”
Safety nets
“It is thus very misleading for petitioners to claim that the TRAIN law will amount to confiscation of property. Considering that social safety nets are provided to poor and vulnerable households, the distribution of income will shield the poor from economic shocks,” the OSG said.
Besides, it said, the tax reform package “has been carefully designed as not to trigger extreme price shocks, especially in prime commodities.”
The OSG said the Department of Finance had previously declared it expected “a temporary and muted inflation impact” purportedly at “an additional inflation maximum of 0.4 percent for 2018.”
The PSA, however, reported last month that the average increase in the prices of basic goods skyrocketed to 4.3 percent in March, much faster than the inflation rate of 3.1 percent during the same period last year.
“To reiterate, the TRAIN law is not arbitrary, oppressive and confiscatory, and does not result in the deprivation of life, liberty or property without due process of law,” the OSG insisted.
“Thus, the TRAIN law is progressive and equitable,” it said.