The government has announced cash hand-outs for the poor to offset tax reforms described by President Duterte as “a Christmas gift for the people”.
About 10 million households will receive 200 pesos per month to help them cope with the impact of the new tax regime that took effect this year.
Signing off his Tax Reform for Acceleration and Inclusion (Train) Act last month, President Duterte also said the new system would help cut poverty and make the Philippines an “upper middle class nation” by 2022.
However, the administration has now been forced to act to offset what has been a heavy blow to the poorest in society.
Speaking at a news briefing today (Wednesday, January 10), Budget Secretary Benjamin Diokno said the government had earmarked 28.8 billion pesos in the 2018 budget to offset the impact of Train.
“This is in response to critics who say that Train is anti-poor because the informal sector and already tax-exempt wage earners will be faced with higher excise taxes,” he said.
“Aside from increasing the take-home pay of many workers with the reduced income tax rates, we will also augment the incomes of the poorest 50 per cent of households.”
According to the Department of Budget and Management, some 24.5 billion pesos has been allocated for unconditional cash grants to the poorest half of families.
In 2019 and 2020, the subsidy will be increased from 200 to 300 pesos, with an overall budget of 38.5 billion.
Diokno also said the inflationary effects of Train were only temporary and would eventually lead to lower prices.
“In the long-term, Train should even lead to lower prices as it will result to better productivity and lower transportation costs with superior infrastructure,” he added.
The Train law will increase take-home pay for most employees but it will also lead to pricier cars, fuel, tobacco, and sugar-sweetened beverages. This, in turn, is expected to lead to higher transportation fares, prices of basic commodities and power rates.
The government’s revenue loss due to the Train law is estimated at 1465.6 billion pesos this year alone. From 2018 to 2022, it is expected to amount to 894.2 billion pesos.