THE Department of Finance (DoF) said that the imposition of a tariff system on imported rice will help increase funding for conditional cash transfers, which could cut  poverty by up to three percentage points.

“The tariff revenues that will be generated from rice imports can augment the funds used for the government’s social welfare programs for the poor (e.g., Conditional Cash Transfer) and rice productivity programs that will enhance efficiency. Tariff revenue is estimated at P27.3 billion annually from 2017 to 2023,” Finance Undersecretary Gil S. Beltran said in an economic bulletin.

Mr. Beltran said a three percentage-point reduction in poverty incidence is equivalent to about 730,000 people.

The government aims to cut the poverty rate from the current 21.6% in 2016 to 14% by the end of its term in 2022.

The proposed tariff system, filed as House Bill 4904, has yet to be approved by the Committee on Agriculture and Food.

The bill amends Republic Act 8178, and authorizes the President to set import duties on the staple grain upon the expiry of the country’s waiver for the special treatment on rice granted by the World Trade Organization on July 1.

Such a move would introduce competitive pricing to the market for rice, while revenue from the tariffs will be given to the affected farmers to improve their productivity, or help them switch to high-value crops.

Mr. Beltran, also the DoF’s chief economist, said that replacing the quantitative restriction (QR) system with a tariff system would cut retail prices for rice by about P7 per kilo.

He said that a reduction in rice prices would be beneficial to the majority of the poor as they spend at least 20% of their household budget on rice.

Bringing down rice prices is crucial to poverty reduction because this staple is a major driver of inflation, according to Mr. Beltran.

The government’s economic managers have decided to allow the expiration of the QR system without applying for another extension with the World Trade Organization.

It first allowed the Philippines to impose a 10-year QR on rice imports in 1995 to give farmers more time to prepare for free trade. It was extended in 2004 until 2012, and then was renewed again in 2014.

During the negotiations for the second extension, which was granted in 2014, the Philippines had agreed to, among others, increase the Minimum Access Volume (MAV) to 805,200 metric tons and reduce the in-quota tariff to 35% corresponding to the ASEAN Trade in Goods Agreement (ATIGA) duty and a most-favored nation (MFN) rate of 40% for volumes imported outside the MAV.

Instead of subsidizing imports, Mr. Beltran said the government could reallocate its funds to public goods and services that directly benefit farmers. These include farm-to-market roads, irrigation, and storage which reduce production and marketing costs.

He noted that the National Food Authority (NFA), which imports rice, has so far received a total of P187 billion in tax subsidies between 2005 and 2015, or an average of P19 billion a year.

“Given that import quotas will be eliminated, the private sector is encouraged to increase importation, thereby reducing import requirements of the NFA and its financial burden to the government,” Mr. Beltran said.

“The NFA can now reorganize and limit its function to proprietary activities, in particular buffer stocking for food security and calamities, and local procurement.”

NFA currently loses about P11 billion annually, even after an operating subsidy of P5 billion on average per year, from 2005 to 2015. As of end-September last year, it has accumulated P155.84 billion worth of debt.

The Legislative-Executive Development Advisory Council earlier this year identified the tariffication scheme as a priority measure. — Elijah Joseph C. Tubayan

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