Finance official clears TRAIN law in basic goods price spike

Metro Manila (CNN Philippines, May 22) — The Finance Department on Tuesday maintained the tax reform law is not the cause of higher prices of basic goods, as it contributed less than half a percent to the inflation rate in April.

Finance Undersecretary Karl Kendrick Chua said other factors are behind the spike in commodity prices, such as the depreciation of peso and the rise in fuel prices.

Chua added profiteering can also be a factor as some businesses have raised prices supposedly due to the tax reform law.

According to Finance Department data, the Tax Reform for Acceleration and Inclusion Act (TRAIN) only accounted for 0.4 percent of April's inflation rate of 4.5 percent, the highest in five years.

This means that for every peso increase in prices, only nine centavos can be attributed to the law.

"By law, TRAIN accounts only for 2 point 8 pesos for diesel and 3 pesos for gasoline. So the bigger part is non-TRAIN. It's because the exchange rate depreciated, it's because the Dubai crude went from 60 before the implementation to 77 as of yesterday," Chua said.

Meanwhile, other factors, including profiteering, accounted for 0.7 percent of the inflation rate.

Chua said prices of basic goods may become stable in a few months, as supply meets consumer demand.

"People are spending. When you increase demand, prices increase because that's how the business reacts...We believe it is transitory because you know, there will be initial reaction but people adjust. Law of supply and demand," Chua said.