TRAIN to contribute 0.7% to inflation in 2018 — NEDA

The government's tax reform program will only account for 0.7 percent of inflation this year, the National Economic and Development Authority (NEDA) said Thursday.

"Socioeconomic Planning Secretary Ernesto M. Pernia noted that based on the agency's calculations, only 0.7 percent (at most) of inflation for 2018 is attributable to the effects of the Tax Reform for Acceleration and Inclusion (TRAIN) law," NEDA said in an emailed statement.

Inflation—the rate at which consumer prices grow—accelerated to 4.0 percent in January, the fastest in over three years.

The BSP then attributed the acceleration to the combination of the first round effects of TRAIN and higher excise taxes.

"Part of the reason for the recent inflation is expectations that the tax reform would indeed increase prices," Pernia said Thursday.

President Rodrigo Duterte signed into law the proposed Tax Reform for Acceleration and Inclusion (TRAIN) Act in December. It took effect in January, lowering the personal income tax and expanding the value-added tax (VAT) base.

Pernia also said that certain merchants could have taken advantage of the passage of the TRAIN law by raising prices ahead of its implementation.

"It is also possible that certain merchants have taken advantage of the situation by raising the prices of their goods prematurely. It is so easy to point a finger at TRAIN," he said.

This was echoed by Finance Undersecretary Karl Kendrick Chua at a press briefing at the Palace on Thursday.

According to NEDA Undersecretary for Policy and Planning Rosemarie Edillon, the increase in prices of food commodities such as corn and meat.

"These inflationary expectations can be tempered by further increasing the supply of goods and services.  This can be done by encouraging more investments or for existing firms to expand production," she said.

"For these, the second round of tax reform, or TRAIN 2, is critical.  This should be accompanied by the passage of the ease of doing business bill,” she added.

The Department of Finance (DOF) on January 15 submitted the second package of the tax reform program to Congress, seeking to reduce corporate income tax (CIT) rates and modernize fiscal incentives.

On Wednesday, the central bank said it expects inflation to accelerate further to as high as 4.8 percent in February, driven by higher utility rates and excise taxes. — BM, GMA News