POLICY NOTES
PN 2019-11: Effects of TRAIN Fuel Excise Taxes on Goods and Prices
by Czar Joseph Castillo, Ramon Clarete, Marjorie Muyrong, and Philip Tuaño
In January 2018, the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) Law took effect, adjusting, among others, the excise tax rates on fossil fuel and petroleum products. This Policy Note discusses the impacts of such adjustment on productive activities and prices across the economy. It finds that the increase in fuel excise taxes would have a slight impact on sectoral outputs and prices, and therefore on household welfare through incomes and employment. Sectors that are energy-intensive would also see a slight decline in output and there would be a slight increase in poverty given higher prices. Nonetheless, the tax reform would also lead to increased economic activity following increased consumption brought about by lower income tax rates, especially among the highest income deciles. This analysis leads to several considerations that policymakers must undertake in designing tax policies, such as the impact of the policy reform on the welfare of the poorer sectors in the country. Click here to download the policy note.
