Don’t Blame TRAIN for Inflation Surge

A confluence of international and domestic events led to the 4.5-percent spike in inflation last April, with the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law at the start of this year playing only a minor role in it, a ranking finance official said.

Finance Undersecretary Karl Kendrick Chua said “inflation rose mainly on local and global factors. TRAIN only accounted for 0.4 percentage points of the 4.5 percent. In other words, if you could buy items for PHP100 last year, you need to spend PHP104.50 now for them and of that increase, only .40 centavos was due to TRAIN.”

A spike in the price of rice because of an alleged shortage, a weaker peso, rising world crude prices, better tax compliance from local cigarette sales and a growing consumer demand led to April’s inflation figure, the Department of Finance (DOF) clarified in a press statement Friday.

Chua said that it is convenient to blame the tax reform package and ask for its suspension but “we have to match the proposed solution to issues we want to address, and TRAIN is not the main reason for inflation.” He was apparently referring to the rising clamor to suspend the enforcement of the TRAIN law, especially on petroleum products amid rising global prices.

The additional excise tax on oil products arising from TRAIN accounts for only 0.2 percentage points of the inflation figure, he added.

Despite the inflation uptick, however, self-rated poverty and hunger incidence in the country “fell to record lows,” Chua noted citing a recent survey by the Social Weather Stations (SWS). The SWS survey placed self-rated poverty at 29 percent in the first quarter of 2018 compared to 35 percent during the same period last year.

“This indicates that price increases are still moderate and that living standards are improving, most likely due to higher income from TRAIN and better jobs,” the finance official added. (DOF PR)