The government will implement its biggest social benefits program yet once the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) is passed by the Congress in full, given that almost P30 billion or 40 percent of incremental revenues from the adjustments in oil excise tax collections estimated at close to P74 billion in 2018 will go to targeted subsidies for the poor and other social mitigation measures.
Finance Undersecretary Karl Kendrick Chua said that a key component of this social benefits program is the targeted cash transfer (TCT), in which the poorest 10 million households in the country would be given bi-annual subsidies to shield them from the impact of the revenue-enhancing measures under the TRAIN.
Updating Finance Secretary Carlos Dominguez III on this tax reform package during a recent Department of Finance (DOF) executive committee meeting, Chua said that each household qualified to receive the TCT will get P1,200 in the first quarter of the year, and another P1,200 in May before the beginning of the school year, or a total of P2,400 for the entire year as provided under the TRAIN.
Under House Bill 5636 or the version of the TRAIN approved by the House of Representatives, the funds will be sourced from the additional revenue from the adjustments in oil excise taxes expected to reach P74.4 billion in 2018, the targeted first year of implementation of TRAIN.
“This is the biggest social mitigating measure under the tax reform,” Chua said. “The TCT is a social protection investment.”
Chua said “the amount of cash transfer was calculated to fully offset the moderate but temporary increase in prices faced by the average household in the bottom 50 percent.”
Besides the TCT, the government will also implement the Pantawid Pasada or a social assistance project for commuters and public transport, and the jeepney modernization program to ease the impact of oil excise tax increases on commuters and the land transport sector; and the Pantawid Kuryente to help small power consumers in missionary electrification areas, Chua said.
A national ID, which will also serve as a social welfare card, will help identify TCT beneficiaries and diminish leakages in the program.
He said countries like Indonesia and Malaysia have carried out similar programs that have proven to be successful when they removed their oil subsidies, “which, in turn, created fiscal space to improve social services and infrastructure.”
Chua said the TCT program will build on the success of the conditional cash transfer (CCT) initiatives of the previous administrations and the National Household Targeting System for Poverty Reduction (NHTS) or the Listahanan, an information system that identifies the poorest households and their locations.
“Under the Listahanan, some 4.4 million households are currently CCT beneficiary-families. This means they can simply be provided a cash top-up similar to the rice top-up now being given to existing beneficiaries,” Chua said.
The remaining 5.6 million poorest households can be identified by tapping the assistance of the Department of the Interior and Local Govermment (DILG), local government units, and Philhealth, which is targeting to register and issue identification cards to an additional 7.9 million non-CCT families this year.
“As in the past, the Land Bank will lead the cash distribution of the TCTs either through cash cards or authorized conduits,” Chua said.
For the new 5.6 million TCT beneficiary-households, Chua said initial estimates show that 1.8 million living in urban areas will receive the grants through cash cards, while the remaining 3.8 million living in rural will get theirs from conduits.
“The Land Bank and the Department of Social Welfare and Development (DSWD) have substantial experience in the CCT program and can build on these to improve the TCT program,” Chua said.
The balance of 60 percent in incremental revenues from oil excises, Chua said, will fund projects on infrastructure, education, health, housing and social protection.
According to the Development Budget Coordination Committee (DBCC), its approved revenue levels that take into account the impact of HB 5636 are projected to reach P2.427 trillion, equivalent to 15.2 percent of GDP.
Disbursements for 2017 are set to reach P2.909 trillion, equivalent to 18.3 percent of GDP.
The first tax reform package as outlined in HB 5636 will contribute P133.8 billion in revenues for 2018, P233.6 billion in 2019, P272.9 billion in 2020, P253.0 billion in 2021, and P269.9 billion in 2022, the DBCC said.