Supply-side factors computed in assessing TRAIN’s impact on inflation

Supply-side factors were computed by the government in analyzing how the Tax Reform for Acceleration and Inclusion (TRAIN) law would impact on inflation, the Department of Finance  said Wednesday.

Finance Assistant Secretary Antonio Lambino II is clarifying his statement during a Senate hearing last week on the implications of TRAIN on inflation. 

“Actually, for the supply side factors, meaning for instance fuel and how it affects the cost of other products down the line, kasama po iyon. Both direct and indirect effects were included in the DOF estimates presented to Congress starting last year, even when TRAIN was being discussed,” he said in a press briefing in Malacañang.

The effect of TRAIN is 0.7 percentage point to the 5.7 percent inflation in July was already included in the computation, Lambino noted.

“Natanong po kasi ni Senator [Bam] Aquino kung kasama ba ang indirect effect, which is the sort of second round effect of TRAIN on inflation. Medyo nalito po kasi kami during the conversation ...” he said.

Not included in the computation were demand-side factors like the possibility of profiteering and the additional take home pay of employees due to lower corporate income tax rates.

“When people have more money in their pockets, isn’t that inflationary? And as we know it is, and therefore ‘Ano iyong effect noon on the higher prices?’ And actually, iyon iyung hindi kasama na indirect effect on the consumption side,” Lambino said.

But due to the scarcity of data, it would be difficult to compute the demand-side factors’ impact of TRAIN, the Finance official said.

“We just started TRAIN in January so ... we don’t have enough data because we are just talking of eight months,” Lambino noted. —VDS, GMA News