The TRAIN has left the station, but where is the final destination?


In December 2017, President Duterte signed into law two extremely important bills -- the Tax Reform for Acceleration and Inclusion (TRAIN) and the General Appropriations bill which earmarked a P3.7 trillion government budget for 2018.

TRAIN, or Republic Act No. 1063 aims to lower personal income tax rates which have remained unchanged for the last two decades. On the other hand, it will impose additional consumption taxes on oil, cigarettes, sugary drinks, and vehicles. So, while TRAIN is expected to increase take home pay of taxpayers (about P150 billion annually), it will increase the prices of selected goods and services.

The expected P130 billion revenue from TRAIN will fund President Duterte’s priority and social infra programs, which, it is hoped, will eventually reduce poverty from 21.6 percent to only 14 percent by 2022. Meantime, TRAIN has to ensure that the10 million poor Filipino families are protected from the anticipated adverse effects (higher prices, profiteering, economic dislocation) of TRAIN.

From DOF website


With TRAIN signed into law and implemented at the start of 2018, the Duterte administration has produced a potentially transformative policy package, after 18 months of contentious executive actions that revolved around a bloody war on drugs. That war succeeded in creating an indelible Duterte brand of outlandish governance in the minds of the Filipino people.

The war on drugs eventually met significant popular opposition, forcing Duterte to grudgingly transfer temporary control over the implementation of the war on drugs from the Philippine National Police (PNP) to the Philippine Drug Enforcement Agency (PDEA) in October 2017.

The more fanatical supporters of President Duterte felt frustrated by this feeble-hearted "obstruction" to the promised bold transformation of Philippine politics and society. They agitated themselves into a frenzied call on November 30, 3027 for Duterte to declare a "revolutionary government" and remove all the Constitutional stops that were in the way of their imagined content and process of reform.

After much hype, the effort to ignite a multi-city clamor for revolutionary government fizzled out. Duterte, who was initially coyly warm to the idea of a revolutionary government, quickly disowned those who beat the drums for a revolutionary government. All the multi-city event succeeded in demonstrating was that there was no popular understanding and support for the nebulous idea of a revolutionary government being espoused. This marked a critical milestone in the Duterte Presidency. Any transformative change under Duterte cannot be powered by popular dreams, they can only be powered by Congressional schemes.

As the year 2017 drew to a close, "brand fatigue" has seemingly caught up with Rodrigo Duterte. The expletive-studded, menacing, tough-guy governance style of Duterte has become somewhat muted. This has been accompanied by evidence of relative autonomy by the bureaucracy. Instead of Duterte dictating the direction and contours of policy, this time, he was willing to defer to the expertise of the bureaucracy and adopt its completed staff work as his own.

The enactment of TRAIN can be characterized as a triumph of the economic and financial cluster in the Duterte cabinet, with the Department of Finance under Secretary Sonny Dominguez playing quarterback. The ball has shifted away from the military and security cluster headed by Secretary Delfin Lorenzana, which had successfully prosecuted the war against the Maute-ISIS in Marawi. In the end, the defense and military establishment won Duterte's repudiation of its traditional mortal enemy, the CNN -- the Communist Party, the National Democratic Front, and the New People's Army.

The ball has also shifted away from the communications and public affairs cluster headed by Martin Andanar, as Duterte's social media warriors -- Mocha Uson, R Nieto, Sass Sassot, Lorraine Badoy – have overstepped the acceptable bounds of expression of their self-importance and received intense public flak and pushback. The weakening of this hitherto formidable social media juggernaut started when these warriors started turning on one another, for imagined transgressions of their contending hierarchy of importance.

Duterte has since reconfigured his communications and public affairs team, replacing Ernesto Abella with Harry Roque on October 30, 2017. This move has further incensed the social media babaylans of Duterte.

The key insight to me is that where Duterte has no strong policy preferences and built-in biases – a reflection perhaps of the limits of personal Presidential knowledge, expertise, experience, or confidence -- the professional bureaucracy has an opening for transformative policy initiatives.

In fact, in the bill the Congress (House and Senate) sent to the President for his signature, there have crept in irrelevant, self-serving rider provisions. These insertions sought to award exemptions that water down the policy package, and in effect confuse and degrade the original tax reform proposal that was crafted by the economic and finance cluster of the cabinet.

Yet, five items President Duterte vetoed in the TRAIN bill that emerged out of Congress showed that he took the side of the bureaucracy against the legislature. These items generally set exemptions for certain groups or products from the TRAIN taxes.

The success of the economic and finance cluster in getting TRAIN passed is in sharp contrast to the failure of another cluster of the bureaucracy, the transportation cluster, to gain headway in improving mobility in Metro Manila. Eighteen months after they gave the people the impression that they hit the ground running, the teams of Secretary Arthur Tugade of DOTR and Secretary Danilo Lim of MMDA have failed.The MRT and LRT have become decrepit, and the management of transportation and traffic in Metro Manila has not visibly progressed beyond interminable tweaks.

The success in the policy formulation process still leaves the question: Is the TRAIN any good? To begin with, against the backdrop of poverty (one of four Filipino families below poverty line) and the historic inequality of wealth in the Philippines, TRAIN is a very preliminary, modest attempt to start the ball rolling. The key to a reasonable evaluation of TRAIN is to look at it over the long term.

I liken the TRAIN to the Local Government Code of 1991 in significance. The euphoria and hopes for transformation spawned by the People Power Revolt of 1986 quickly dissolved, as Congress dragged its feet on or mismanaged the mandatory reforms contained in the 1987 Constitution. Among these were the anti-political dynasty law, the decentralization law, and the autonomous regions in Cordillera and Mindanao. After much hawing and hewing by the people’s representatives in Congress, the Local Government Code of 1991 was finally passed.

It was an exemplary piece of legislation, but the neglect to review and follow-through -- and outright subsequent backpedaling (e.g., on local special bodies) – over the past 25 years has made the outcome border on duplicity. The Congress did not undertake the review of the Local Government Code that the law mandated to happen every five years. The imagined incremental increase in the share of local governments of the IRA beyond the 40 percent mark never happened. Local governments were saddled with "unfunded mandates" from the national government.

With the LGC 1991 experience as background, it is too early to tell if TRAIN’s target reduction of poverty to only 14 percent by 2022 is achievable. It is certain TRAIN will not achieve its promise unless the policy implementation process gets much more systematic attention than the Local Government Code of 1991 did.

From the DOF website


The most critical use for additional revenue generated by TRAIN must be to provide safety nets to the poorest of the poor Filipino families -- around 10 million of them. As envisioned by TRAIN, these families should receive P200 per month in transfers, to help them cope with higher prices that will result from the direct and indirect impacts of the taxes imposed by TRAIN.

P200 per month for an average poor family of five persons? With that amount, the Duterte government certainly fails a face validity test (too paltry to sound and look right, possibly adding insult to injury), an emotional intelligence quotient test, and the “malasakit” test. That poor households will be adversely impacted by the TRAIN is certain, as most of these households will not benefit from income tax exemptions, but will suffer higher prices in fuel and sugary drinks, among others.

It is extremely doubtful the DSWD will be able to provide the requisite safety nets in the form of cash transfers to these 10 million families. That operation is too much of a logistical nightmare for any government agency. The cost of serious implementation will eat up a large portion of the available fund. The cost of token implementation will be much higher. The multitude poor can change the public mood towards Duterte from buoyant optimism, to a vengeful sense of betrayal.

This will not be a promising platform for pursuing the other drastic transformative actions lined up by Duterte, such as the shift to a federal and parliamentary form of government in the next one and a half years leading to the May 2019 elections.

The other problem is, it is not clear whether the government will be able to put the additional funds generated by TRAIN to good use. The government rehabilitation effort in the wake of Typhoon Yolanda, as well as the train of natural disasters that have struck the country since, has been extremely unsatisfactory. Add to this the Marawi siege and other human-made disasters. These demonstrate the inadequacy of government (strategy and policy) and the bureaucracy (operations and fieldcraft) regardless of administration, to put its resources to prompt and proper use.

So, it is too early to laud or lament TRAIN. It is the first step in a multi-step sequence that has yet to unfold. By itself, with so many variables, TRAIN does not appear to be wired to deliver acceleration or inclusion.

The singular positive significance of TRAIN is that it is a fortuitous opening move of the Duterte Administration to deliver on its promise for transformative change that citizens can and are now actually engaging, debating, tracking, and evaluating. It is a fresh and different offering from the embarrassing impeachment shenanigans in the House of Representatives and the Senate.

It is best for government to now spend the time checking on the morale, competencies, systems, and capacities of the foot soldiers of government expected to cast the safety net. At the moment, the Department of Social Work and Community Development (DSWD) and the Department of Interior and Local Government (DILG) do not appear to be in a position to run with the TRAIN ball. They have been headless for more than half a year already, since Secretaries Mike Sueño and Judy Taguiwalo were rather unceremoniously discharged from the DILG and DSWD, respectively.

One wonders, if the completed staff work that the Department of Finance put into getting the TRAIN passed in Congress did the job, whose job is it to ensure there is completed staff work in getting TRAIN implemented as a whole-of-government effort?

Sure, the TRAIN has left the station, but what will be its actual final destination? To the 10 million poor families, hopefully the outcome will not look and feel somewhat like “Final Destination, the Movie”.

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