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‘Runaway TRAIN’

COMMONSENSE - Marichu A. Villanueva (The Philippine Star) - May 30, 2018 - 12:00am

Since January 1 this year when the Tax Reform for Acceleration and Inclusion (TRAIN) law took effect, its impact to consumer prices has gathered so much steam, so to speak. In fact, government statistics have shown how the TRAIN law has pushed up prices of consumer goods and services being monitored on regular basis by our economic managers.

The first package of tax reforms supposedly spread out the increase in fuel taxes over the next three years starting this year until 2020. Government economic managers insist the new taxes were not entirely to blame.

Administration critics and several labor groups have been pressing the government to suspend the implementation of the TRAIN law amid rising fuel prices blamed for the steep increases in the prices of basic goods and services.

Prices of goods and services in the country rose at a faster pace of 4.5 percent in April from 4.3 percent in March and 3.2 percent from a year-ago level. Out of the April rate, 0.5 to 0.7 percentage points can be attributed to TRAIN law.

Inflation is expected to peak this month and in June.

The TRAIN law imposed hefty excise tax increases on gasoline from P4.35 per liter to P7 per liter while new tax rates of P2.50 per liter were imposed on diesel, P3 per liter on kerosene, and P2.50 per liter on auto liquefied petroleum gas (LPG). There is a provision though in the law that the TRAIN taxes on fuel products can be suspended should the average benchmark crude oil prices hit $80 per barrel for a period of three months.

The Department of Finance (DOF), however, clarified the government can only suspend the second tranche of fuel excise tax increase only by next year. At the outset, the DOF frowns upon calls to suspend the TRAIN law and warns it would have a negative impact on the government’s infrastructure program and ability to fund the free tuition program and the increase in salaries of the uniformed personnel.

The DOF explains the proposed suspension of higher excise tax rates on crude oil products under the TRAIN law would not result to any rollback of prices of refined petroleum products – gasoline, diesel and kerosene. What DOF officials seem to tell us is there is really nothing that the Executive Department can do even if this is the most immediate remedy to cushion us consumers from the global market-driven rise in the prices of crude oil. I beg to disagree.

President Duterte is not powerless at all to pull back tax rates on petroleum products as provided for in the TRAIN Law.

Under our country’s 1987 Constitution, the President can exercise his power to tinker with tax and tariff laws like the TRAIN Act while Congress is not in session. The 17th Congress winds down its second regular sessions this week.

So for the next two months, the President can invoke his powers to amend the TRAIN Law through an Executive Order (EO). President Duterte must do so within the period he enjoys legislative powers while Congress is in recess.

Senators and members of the 17th Congress will report back for sessions starting July 23 when President Duterte is scheduled to deliver his next state of the nation address (SONA). It would be an opportunity for the Chief Executive to ask both chambers to consider a remedial legislation on the TRAIN Law now that its debilitating impact are being felt largely by the masses. At least one measure is pending at the Senate seeking a rollback of fuel taxes should inflation breach the government target.

But at the House of Representatives – where proposed new tax bills must originate as required by our constitutional process – the principal authors of the TRAIN Law have distanced themselves. Take the latest public statements from Quirino Rep. Dakila Cua, chairman of the House committee on ways and means, who has washed his hands off from shepherding the approval of the TRAIN law.

When interviewed by my good friend and fellow STAR columnist Cito Beltran at the latter’s “Agenda” TV talk show program last Monday, Cua pointed to the DOF as principally the chief government agency behind the drafting of the TRAIN Law that they approved in Congress.

In that particular “Agenda” TV program where Cua was a featured guest, it has a very apt title “Runaway TRAIN” that best describes how the law has rammed through and pushed up our daily costs of living. The “Agenda” featured the controversial law as topic of its maiden airing at the newly launched “One News” at Cignal Channel 8, staffed by the editors and reporters of The Philippine STAR, the BusinessWorld and TV5 Bloomberg Philippines – all under MediaQuest of Manny V. Pangilinan’s Group of Companies.

At the simple launching rites held later that night at the Cignal office in Mandaluyong City, I ribbed Cito for the nice choice of title of the featured topic of “Agenda.” Cito told me it was a takeoff from a popular song in the 1960s with the same title and he sang his favorite lines of “Runaway Train.”

“Runaway train never going back; Wrong way on a one way track; Seems like I should be getting somewhere; Somehow I’m neither here nor there.”

According to google.com, Soul Asylum sang the song “Runaway Train” written by Dave Pier and was among the songs in the album Grave Dancers Union released in 1992.

Aside from this song, google.com search also showed there was also a “Hollywood movie with the same title “Runaway Train,” which was a fiction story in 1985 about two escaped convicts and a female railroad worker who were stuck on a runaway train as it barreled through snowy desolate Alaska.

By analogy, I would like to believe such situation of a “Runaway TRAIN” is not the intention of our economic managers to happen. But the reality on the ground is the TRAIN law can indeed cause such runaway inflation if not checked at this early stage of its implementation. And President Duterte, I must repeat, is not at all helpless to put on the brakes on the “Runaway TRAIN” and recalibrate its speed of implementation before it further wreaks havoc to our country’s economy.

CONSUMER GOODS TAX REFORM FOR ACCELERATION AND INCLUSION TRAIN LAW
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