Impacts of TRAIN Fuel Excise Taxes on Employment and Poverty

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This Policy Note discusses the impacts on poverty and employment of the increased fuel excise tax rates under the first package of the Tax Reform for Accelerated Inclusion (TRAIN) Law. Among others, it finds that the general price increase resulting from new excise tax rates on fuels slightly increased poverty incidence, particularly among farmers and transport workers. Nonetheless, the law's provision on unconditional cash transfer mitigated such increase in poverty. In terms of employment, the net effect was positive, wherein the total employment still grew. Still, employment in some sectors suffered from reduced level of economic activities. Although overall employment may still increase, the transition from one work to another may become costly for some workers. To address this issue, this study calls for the crafting of active labor market policies, such as direct employment creation, and passive labor market policies especially those that link workers to available work useful in minimizing the welfare loss of workers.