THE Tax Reform for Acceleration and Inclusion Act (Train) could result in improved economic and poverty indicators, according to a policy brief titled “Assessing the Potential Impacts of the Tax Reform for Acceleration and Inclusion and the Build Build Build (BBB) Program,” released by De La Salle University–Angelo King Institute on Wednesday.
Implemented in 2018, the tax measure exempts those earning annual taxable incomes of P250,000 and below from paying personal income taxes. In exchange, new taxes were imposed on automobiles, fuel and sugar-sweetened beverages, among others.
In 2018, a P68.4 billion revenues attributable to Train exceeded its full-year target of P63.3 billion by 8.1 percent.
The authors of the study said a simulation found out that the tax measure “has prompted additional revenue in social programs and infrastructure spending.”
Citing National Economic and Development Authority (NEDA) data, the authors stated that total additional government revenues from Train are seen to reach P144.2 billion this year, P187.7 billion in 2020, P186.8 billion in 2021, and P177.8 billion in 2022.
The authors also said 70 percent of the expected government revenue from the tax measure will be allocated to the Build, Build, Build program, which aims to improve infrastructure, roads and network of all regions in the country with a budget of P8.44 trillion until 2022.
Train-sourced allocation for infrastructure spending this year was programmed to reach P100.9 billion, P131.4 billion by 2020, P130.8 billion by 2021 and P124.5 billion by 2022.
The remaining 30 percent of Train revenue will be allocated to social program expansions such as the Pantawid Pamilyang Pilipino Program (4Ps), the rice discounts of the National Food Authority (NFA), education and health projects, the authors stressed.
In a breakdown, the government allotted P35 billion for the Unconditional Cash Transfer (UCT) program this year, and P36 billion for next year; P1.7 billion for the 10-percent fare discount for minimum wage earners and unemployed for a year until 2022; P6.5 billion for the 10-percent NFA rice discount a year until 2022; and P100 million for fuel vouchers to 100,000 public utility jeeps/units a year until 2022.
The authors further said “there are clear increases in the capital stock, which drive economic growth with the industry sector leading the way and the services and agricultural sectors lagging behind.”
Based on the simulation, government capital stock could reach P59.5 billion this year, P153.6 billion by 2020, P279.9 billion by 2021, and P404.2 billion by 2022.
“With regard to the inflationary effects, we can see that the additional excise taxes increase inflation in 2018 and 2019 but decelerates after that as higher growth would significantly dominate the inflationary effects,” the authors added.
The simulation showed Train stoked the inflation rate by 0.69 percent in 2018. To recall, inflation rate averaged 5.2 percent last year.
This year, the simulation revealed that the contribution of the tax measure to inflation could drop to 0.54 percent, before decelerating further to 0.36 percent in 2020, -0.04 percent in 2021, and -0.048 percent in 2022.
The authors highlighted that “results of the poverty and distributional microsimulation showed that the policy had reduced poverty and reduced income inequality very slightly.”
They said poverty incidence — the proportion of families or individuals with a per capita income or expenditure less than the per capita poverty threshold to the total number of families or individuals — eased to 21.053 from the baseline value of 21.503.