MEMORANDUM

To: Atty. Kenneth O. Tamala

From:
Re: Train Law
Date: March 2, 2018

QUESTIONS PRESENTED

1. What is Republic Act No. 10963 (TAX REFORM FOR ACCELERATION

AND INCLUSION LAW) all about?

ANSWER

Tax Reform for Acceleration and Inclusion (Train) Law or Republic Act No
10963 took effect on January 1, 2018. Train overhauls the outdated National Internal
Revenue Code (NIRC) which was adopted 20 years ago.

It is the first package of the comprehensive tax reform program (CTRP) envisioned
by President Duterte’s administration, which seeks to correct a number of
deficiencies in the tax system to make it simpler, fairer, and more efficient. It also
includes mitigating measures that are designed to redistribute some of the gains to
the poor.

DISCUSSIONS
Train relatively decreases the tax on personal income, estate, and donation.
However, it also increases the tax on certain passive incomes, documents
(documentary stamp tax) as well as excise tax on petroleum products, minerals,
automobiles, and cigarettes.
The Train law also imposes new taxes in the form of excise tax on sweetened
beverages and non-essential services (invasive cosmetic procedures) and removes
the tax exemption of Lotto and other PCSO winnings amounting to more than
P10,000.
Nonetheless, the new law also contains praiseworthy provisions which aim to
simplify tax compliance.

1. New Personal Income Tax Rates

Personal income tax rates will be lowered, while salaried employees earning annual
income of P250,000 or below will be exempted from paying income taxes.

Full details of the New Personal Income Tax Rates and Income Tax Tables can be
found here.
2. Lower Tax Rates for Professionals
With the revised personal income tax table, salaried employees will surely benefit
from the lower tax rate. Self-employed professionals, meanwhile, can expect to pay
lower taxes as well with the reduced tax rates for professionals, as follows:
 ANNUAL SALES OR GROSS
TAX RATE
RECEIPTS

P250,000 and below 0%

Below P3 million May choose either 8% flat tax on gross receipts or follow p
income tax table

Above P3 million Subject to personal income tax table

Professionals will no longer have to file and pay the percentage tax; instead they will
be charged a withholding tax of 8% flat rate on gross sales or receipts.
Self-employed professionals earning annual income of P3 million and below may
choose to pay the 8% flat tax or follow the personal income tax table.
3. Tax on 13th Month Pay and Other Bonuses
The threshold for tax exemption on 13th month pay and other bonuses received by
salaried employees has been raised from the current P82,000 to P90,000. This means
13th month pay and bonuses paid to employees that amount to P90,000 or below
will not be taxed.
4. Tax on Drinks using Sugar and Caloric / Non-Caloric Sweeteners
Beverages that use sugar and other sweeteners will be taxed effective January 2018.
These include softdrinks and other cola drinks, fruit juices, and powdered drinks,
among others.
The sugar tax is as follows:
 P6.00 per liter of drink that uses caloric and non-caloric sweeteners
 P12.00 per liter of drink that uses high fructose corn syrup (HFCS)
5. Tax exemption of milk, 3-in-1 coffee, medicines for diabetes, etc.
Exempted from the sugar tax are milk, 3-in-1 coffee, 100% natural fruit juice or
vegetable juice, medically-indicated beverages, and drinks and beverages that use
natural sweeteners such as coco sugar or stevia.
Meanwhile, drugs and medicines prescribed for diabetes, high cholesterol,
or hypertension will also be exempted from the 12% VAT.
6. Taxes on LPG, Diesel, Gasoline, and other fuel products

Liquefied Petroleum Gas or LPG is currently not taxed, but will be charged excise
tax as follows:
 P1.00 tax per liter in 2018
 P2.00 tax per liter in 2019
 P3.00 tax per liter in 2020
Diesel is also currently not taxed, but will have new taxes, as follows:
 P2.50 tax per liter in 2018
 P4.50 tax per liter in 2019
 P6.00 tax per liter in 2020
Gasoline, both regular and unleaded, will have the following excise taxes raised from
the current P4.35 per liter:
 P7.00 tax per liter in 2018
  P9.00 tax per liter in 2019
 P10.00 tax per liter in 2020
Other fuels and oil products will be taxed as follows:
 Aviation gas – P4.00 per liter
 Asphalts – P8.00 per kilo
 Kerosene – P3.00
 Naphtha – P7.00
 Bunker fuel – P2.50
 Lubricating oil – P8.00
 Paraffin wax – P8.00
 Petcoke – P2.50
UPDATE: Pres. Duterte has vetoed the exemption from excise taxes of petroleum
products used as input, feedstock, or as raw material in the manufacturing of
petrochemical products, or in the refining of petroleum products, or as replacement
fuel for natural gas fired combined cycle power plants.
7. Taxes on Cars and Automobiles

The new excise taxes for cars will follow a four-tier scheme:
Excise Tax on Cars and Automobiles

NET MANUFACTURER'S TAX RATE ON HYBRID TAX RATE ON NON-HY

PRICE CARS CARS

P600,000 and below 2% 4%

Above P600,000 to P1 million 5% 10%

Above P1 million up to P4 10% 20%

million

Above P4 million 25% 50%

Pick-up trucks and electric vehicles will be exempted from additional taxes. Hybrid
cars, as seen in the table above, will be charged 1/2 (half) the taxes imposed on non-
hybrid automobiles.
8. Tax on Coal
The approved excise tax on coal is as follows (currently P10.00 tax per metric ton):
 P50.00 tax per metric ton in 2018
 P100.00 tax per metric ton in 2019
 P150.00 tax per metric ton in 2020
9. Tax on Tobacco Products
Excise taxes on tobacco products will be increased to P32.50 initially during the first
six months of 2018, then will rise to P35.00 from the rest of 2018 until 2019.
From 2020 to 2021, the tobacco tax will rise to P37.50, followed by a fixed tax of
P40.00 to be imposed from 2022 to 2023. From 2023 onwards, tobacco taxes will
rise 4% annually.
10. Donor’s Tax
Donations or gifts with at least P250,000 worth will be charged a donor’s tax of 6%
flat rate. This will be charged regardless of the relationship between the donor and
the donee.
11. Estate Tax
The estate tax, or tax levied on the properties or estate of lawful heirs and
beneficiaries inherited from a deceased person, will now be subject to a flat rate of
6% on the amount in excess of P5 million.
Estates with a net value of P5 million and below will be exempted from paying the
estate tax. Family homes that are valued at P10 million or less will also be exempted
from estate tax. Under existing tax laws, only family homes worth P1 million are
exempted.
12. Tax on Cosmetic Surgery and other Aesthetic Procedures
Starting 2018, there will be a 5% tax on cosmetic surgeries, aesthetic procedures,
and body enhancements.
13. Documentary Stamp Tax
The documentary stamp tax (DST) charged on some legal or business transactions
will double from P1.50 to P3.00 beginning 2018.
14. Stock Transaction Tax
Stock trading in the Philippines might be affected with the revised taxes on stock
market activity.
The stock transaction tax — a tax charged on stock sellers when a buy or sell
transaction is made — will be increased to 0.6% of the gross trade amount from the
current 0.5% rate.
Stock-related transactions of companies not listed in the Philippine Stock Exchange
(PSE) will be slapped with a higher stock transaction tax of 15%, an increase from
the current 5% or 10%.
15. Foreign Currency Interest Income Tax
The tax on interest income on foreign currency deposits is currently pegged at 7.5%.
This will increase to 15% of the interest on foreign currency deposit unit (FCDU)
under the TRAIN tax reform.
List of Vetoed Items by Pres. Duterte
Here are five (5) items in the tax reform bill that was vetoed by Pres. Duterte when
he signed the bill into law.
1. Veto on the 15% special tax rate for employees of Regional Headquarters
(RHQ), Regional Operating Headquarters (ROHQ), Offshore Banking Units,
and Petroleum Service Contractors and Subcontractors. Thes employees will
be taxed using the regular income tax table as shown in Item No. 1 above.
2. Veto on the exemption of self-employed professionals, with gross sales or
receipts not exceeding P500,000, from the payment of the 3% percentage tax.
3. Veto on the excise tax exemption of petroleum products used as input,
feedstock, or as raw material in the manufacturing of petrochemical products,
or in the refining of petroleum products, or as replacement fuel for natural gas
fired combined cycle power plants (see Item No. 6 above).
4. Veto on the zero rating of sales of goods and services to separate customs
territory and tourism enterprise zones, specifically, the areas under the
Tourism Infrastructure Enterprise Zone Authority (Tieza).
5. Veto on the earmarking of incremental tobacco taxes

ARTICLES:

1. BIR issues rules on higher stock transaction tax under TRAIN Law
By: Ben O. de Vera - Reporter / @bendeveraINQ Philippine Daily Inquirer / 02:14
PM February 28, 2018
The Bureau of Internal Revenue has issued the rules for the provision of the Tax
Reform for Acceleration and Inclusion (TRAIN) Act raising the percentage tax on
stock transfers.
Revenue Regulations No. 9-2018 signed by Finance Secretary Carlos G. Dominguez
III and Internal Revenue Commissioner Caesar R. Dulay in February contained the
guidelines implementing the increase in stock transfer tax provided in Section 39 of
Republic Act No. 10963 or the TRAIN Law.
“There shall be levied, assessed and collected on every sale, barter, exchange, or
other disposition of shares of stock listed and traded through the local stock
exchange other than the sale by a dealer in securities, a tax at the rate of six-tenths
of 1 percent [0.6 percent] of the gross selling price or gross value in money of the
shares of stock sold, bartered, exchanged or otherwise disposed which shall be paid
by the seller or transferor,” the BIR said.
Previously, the percentage tax on sale, barter or exchange of shares of stock listed
and traded through the local stock exchange or initial public offering was a lower
one-half of 1 percent or 0.5 percent.
As such, the TRAIN Law increased the stock transaction tax by 20 percent.
According to reports, the increase in the stock transaction tax is expected to raise
P1.7 billion in additional revenues per year.
However, the Philippine Stock Exchange had raised concern that the higher tax rate
would make local equities less competitive versus their regional peers.
At the previous rate of 0.5 percent, the Philippines’ stock transaction tax was already
the highest in Asean.
In Malaysia, stock transactions at the Bursa Malaysia are charged with only 30 basis
points of the transaction value in the form of stamp duty while in Hong Kong
Exchanges, such transactions are charged with only 10 basis points of the transaction
value in the form of stamp duty. In Vietnam, a capital gains tax equivalent to 10
basis points of gross sale proceeds is levied on transactions through the Ho Chi Minh
Exchange.
Indonesia also imposes a stock transaction tax equivalent to only 10 basis points of
the transaction amount. There is an additional 50 basis points charged for founder
shares of companies doing an initial public offering.

2. TRAIN law boosts BIR take

Excise tax collections surged 81.7% year-on-year to P22.1B in January
By: Ben O. de Vera - Reporter / @bendeveraINQ Philippine Daily Inquirer / 05:10
AM February 27, 2018
A combination of higher rates and new levies allowed the Bureau of Internal
Revenue (BIR) to collect P22.1 billion in excise taxes in January or 7.7 percent
above target.

In a statement, the Department of Finance quoted Internal Revenue Commissioner

Caesar R. Dulay as saying that excise tax collections at the start of the year exceeded
by 81.7 percent the P12.2 billion collected in January last year and surpassed the
P20.5-billion goal for the month.
The higher excise tax take in January came on the back of the implementation of the
Tax Reform for Acceleration and Inclusion (TRAIN) Act.
Signed by President Duterte in December, the TRAIN law starting Jan. 1 this year
jacked up or slapped new excise taxes on oil, cigarettes, sugary drinks and vehicles,
among other goods, to compensate for the restructured personal income tax regime
that raised the tax-exempt cap to an annual salary of P250,000.
In the case of tobacco excise taxes, Dulay said January collections amounted to
P12.1 billion, up 95.9 percent from P6.2 billion in the same month last year and 52.8
percent higher than the P7.9-billion target.
Under the TRAIN law, the unitary excise tax slapped on cigarettes rose to P32.50 a
pack effective Jan. 1 from P30 last year.
The TRAIN law also mandated a further increase in the cigarette excise tax rates to
P35 a pack from July 1, 2018, to Dec. 31, 2019; P37.50 from Jan. 1, 2020, to Dec.
31, 2021; and P40 from Jan. 1, 2022, to Dec. 31, 2023
From Jan. 1, 2024 onward, the specific tax rate on tobacco products will be increased
by 4 percent yearly.
DOF data showed that the government targeted excise tax collections from cigarettes
this year to reach P126.9 billion.
From automobiles, excise taxes reached P443.3 million, exceeding by 29.4 percent
the P342.6-million goal and surpassing by 113.1 percent the P208 million collected
a year ago.
Collections from sugary drinks amounted to P2.5 billion in January. The excise tax
slapped on sugar-sweetened beverages was introduced in the TRAIN law.
Collections from Coca-Cola Femsa Philippines Inc. hit P1.19 billion; Pepsi Cola
Philippines Inc., P666 million; ARC Refreshments Corp., P293 million; Nestle
Philippines Inc., P143.5 million; Inter Beverages Philippines, P112 million; Asia
Brewery Inc., P18 million; Liwayway Marketing, P16 million; SMB Inc., P10.7
million; and Zesto Corp., P7 million.

3. Tax reform has ‘minimal’ impact on prices of consumer goods —DTI

Published March 28, 2018 12:42pm
By JON VIKTOR D. CABUENAS, GMA News
The enactment of the Tax Reform for Acceleration and Inclusion (TRAIN) law
contributed minimally on prices of consumer goods, the Department of Trade and
Industry (DTI) said Wednesday.
In a press conference in Makati City, Trade Undersecretary Ruth Castelo said prices
of consumer goods were only minimally affected by the passage of the TRAIN Law.
“The effect of TRAIN Law Package 1 on BNPCs (basic necessities and prime
commodities) ranges from only 4 centavos to 25 centavos,” she said.
President Rodrigo Duterte signed the proposed tax reform proposal into law on
December 19. It reduced the personal income tax and expanded the value-added tax
(VAT) base.
With the tax reform law in effect starting Jan. 1, 2018, inflation in January registered
at 4.0 percent, the fastest in over three years.
But Castelo said the increase in prices of consumer goods was mainly due to other
factors.
“The increase that you will see now on the prices of BNPCs is caused by other
factors such as foreign exchange, presyo ng raw materials ... at ang presyo ng crude
oil na ini-import natin from Dubai,” she said.
“The price of crude oil has increased in the international market, not only the selling
price to the Philippines,” Castelo noted. —VDS, GMA News

4. TRAIN’s bells and alarms

By: Francis Lim - @inquirerdotnet Philippine Daily Inquirer / 05:10 AM March 22,
2018
Just a few days after it took effect, the Tax Reform for Acceleration and Inclusion
(TRAIN) law has set off more than just a few alarms. In addition to allegations it
was procedurally infirm (there is a pending case in the Supreme Court challenging
it), TRAIN has been criticized as being antipoor.
While Congress tried its best to cushion the law’s impact on the poor, it shifted the
burden of taxation to consumption—greater excise tax on certain goods (such as
petroleum products and coal). Consequently, oil companies have been raising fuel
prices since mid-January. The price of basic commodities (e.g. rice, vegetables, fish)
and services (e.g. electricity, jeepney fares) have increased as well. Indeed, the rise
in excise taxes on fuels has left suppliers little, if no choice, but to shift the burden
to consumers. A spike in fuel prices equals higher transportation costs for all goods
and services.
Despite the many warning signs and growing public anxiety, President Duterte and
the TRAIN’s proponents continue to harp on the bigger take-home pay everyone
will be getting. According to the Department of Finance, 83 percent of Filipinos will
no longer need to pay taxes as they belong to the P250,000 and below income class
who are exempt from personal income tax.
Critics said the proponents were suffering from tunnel vision, noting the savings
from the exemption would just go to the higher prices of basic commodities and
services. The critics added even the P200-monthly subsidy for the qualified
recipients from the poorest of the poor is far from sufficient to make up for the
inflationary costs.
The hefty income tax cuts and subsidy are just some of the many features of TRAIN.
The law was primarily envisioned as an economic measure to spur investment.
It also calls for sacrifice from all of us.
Additional revenues are seen to finance the long-awaited projects under Mr.
Duterte’s “Build, Build, Build” program, which is aimed at attracting much-needed
investments. More investments mean more jobs and higher pay for our people.
Indeed, TRAIN is a two-pronged attack on poverty. It seeks to correct a number of
deficiencies in the tax system to make it simpler, fairer and more efficient. It also
aims at redistributing some of the gains to the poor. It is envisioned to reduce the
poverty rate to 14 percent from 22 percent by 2022 and eventually eradicating
extreme poverty by 2040.
Despite its immediate and direct impact on the prices of basic goods and services, it
is too early to criticize or derail the TRAIN. What we have just seen is the first of
the four tax reform packages. Let’s wait for all the packages to be completed before
passing judgment.
Once completed as envisioned, the TRAIN will hopefully travel smoothly towards
its ultimate destination. I fervently hope that it will be able to reasonably
demonstrate—sooner than later—that the vision behind it is achievable. Otherwise,
President Duterte’s “greatest gift to the Filipino people” will be touted (unfairly, I
think) as a grand deception or another case of fake news. God forbid!

5. Sans DOF guidance, BOC Clark bound to apply TRAIN law

By Ashley Manabat - March 20, 2018
CLARK FREEPORT—The Bureau of Customs (BOC) Port of Clark is bound to
apply the Tax Reform for Acceleration and Inclusion (TRAIN) law as the
Department of Finance (DOF) has yet to give instructions if free ports are exempted
from its implementation.
This was the statement made by BOC Port of Clark District Collector Maritess
Martin on Monday at the first “Kapihan” session of the Supply Chain Management
Association of the Philippines—North Luzon Chapter at the Xenia Hotel here.
“I raised that during our strategic planning. How about the free zones? They [DOF]
said they are still looking into it, so for now we are applying it,” Martin said as she
discussed the BOC’s five-point priority program, foremost of which is stopping
corruption as outlined by Commissioner Isidro S. Lapeña.
The Clark Investors and Locators Association (Cila) had initially expressed
apprehension on the implementation of Package 2 of the TRAIN law, which covers
investments.
During the forum, Cila President Frankie Villanueva discussed what proactive steps
were taken and presented to the DOF and other relevant government agencies to
make the TRAIN law fruitful to investors.
Villanueva said Cila also consulted with the Clark Development Corp., which also
expressed its concern.
“What we are waiting for is the draft, and as soon as that draft is out we will
announce it to everyone and have a workshop with locators from different ecozones
on its possible effects and how it compares with our neighbors,” Villanueva said.
“Hopefully it will carry the spirit of TRAIN 2 to encourage more accelerated
investments and inclusiveness,” he added.
Villanueva disagreed with the view that relevant provisions of Package 2 represented
locator incentives as leakage in government income.
“The only principle we would like to suggest is competitiveness because all our
neighbors are giving their incentives regularly,” he said.
“Competitiveness should be included in the principle fiscal incentives,” he added.
Villanueva proposed an income tax holiday of up to 10 years from the present five-
year tax holiday. “Singapore has 15 years and Vietnam is offering fiscal incentives
for the project duration,” he said. “If we want to be competitive, we should come up
with something that will stand up with our neighbors.”
“What is happening is, even if you have income tax holiday for five years, for the
first three years you cannot use those income tax because you are not making money
yet. If you cannot carry over your losses it’s useless,” he said.
He also said one of the reasons why we have very low investments here is there is
no stability in policy.
He pointed out that the Philippines has suffered losses for not protecting contracts.
“We should protect contracts,” he said.
“We must take care of our existing clients. They are more important because they
are here already,” he said.
Villanueva said small and medium enterprises under TRAIN 2 should also be linked
with the global supply chain to achieve inclusiveness.
Villanueva acknowledged Cila Chairman Dr. Irineo Alvaro Jr. saying through his
efforts, “we were able to present our case to Senate President Aquilino L. Pimentel
III.
“The meeting was very fruitful because at the end of the session, Senator Pimentel
said the bottom line is whatever piece of legislation that will be passed, we must
make sure it must be competitive,” Villanueva said.
The incentives that are being offered by our neighbors can be compared with what
we have to offer to make sure we are competitive, he added.
The corporate income tax (CIT) of 25 percent is high but the average is only about
20-percent CIT in the Association of Southeast Asian Nations, he said.
“We strongly believe that giving a 12-percent CIT will not cause any shortages in
collection because this will make collection more efficient,” Villanueva said.

6. Economist sees nearly 6% inflation in May-June

Czeriza Valencia (The Philippine Star) - March 28, 2018 - 12:00am
MANILA, Philippines — Inflation likely spiked to between 4.9 percent and five
percent this month, reflecting the continuing market adjustment to the first package
of the tax reform program and a confluence of other factors such as power rate hikes
and fluctuating oil pump prices, an economist said yesterday.
Ateneo de Manila professor Alvin Ang expects inflation this month to accelerate due
to the power rate hike implemented in two tranches from February to March, as well
as the fuel price adjustments during the period.
This compares with the February inflation figure of 4.5 percent – the highest in over
three years – still using 2006 as base year.
Ang said inflation for 2018 is expected to peak in May to June which coincides with
the opening of the new school year and the financial preparations for such, during
which inflation is expected to peak “close to six percent.”
“The effect of TRAIN (Tax Reform for Acceleration and Inclusion) is still not fully
felt, so this is a continuing impact of TRAIN. The full-blown impact of TRAIN will
be in May to June so there will be two more months of adjustments,” he said.
“This is the transition of going back to school and people are spending money plus
the base effect. So the effect would kick up that point,” he said.
As the market adjusts, inflation is expected to taper off toward the end of the year,
possibly returning to the four percent territory by year-end, Ang said. This is
expected to result in an average inflation figure of five percent for 2018.
“Hopefully by that time, the full effects of TRAIN would have been absorbed by the
economy,” he said.
As the market adjusts, people are expected to adjust their spending patterns and
producers of goods and services are also seen adjusting their level of production to
what is acceptable to consumers.
Other than the transitory impact of the TRAIN law – that imposes higher excise tax
alongside the lowering of income tax – another reason for the fast acceleration of
inflation since the beginning of the year is the failure of the government to
communicate to the public the benefits of TRAIN beyond having higher disposable
income for consumption, Ang said.
“If government has managed the expectation of the public, we would not have
inflation this high. If you look at inflation, the impact is broad-based. Early in
January, prices have risen because it was said that price hikes are expected,” said
Ang.
“If I’m the government, I will tell the people, you will have this much money, I
encourage you to save or invest it because the country needs more investments,” he
added.

7. Lotto winnings tax-free no more—BIR

MARCH 27, 2018 LIFESTYLE
National Capital Region (NCR) Head Revenue Executive Assistant Marivic Acosta-
Galban, cautiously defined the 20 percent tax in all lotto winnings, starting January
2018, under the Tax Reform for Acceleration and Inclusion (TRAIN) Law of the
Bureau of Internal Revenue (BIR), before the PCSO top management and the
Accounting and Budget Department focal persons at the 9th floor of Sun Plaza
Building, Shaw Boulevard in Mandaluyong City on March 9.
PCSO GM Balutan hands over Certificate of Appreciation to Marivic Acosta-Galban
after the TRAIN Law Forum. Also in photo are (from left) Assistant General
Manager for Management Services Sector Lauro Patiag, AGM for Branch
Operations Sector Remeliza Gabuyo, AGM for Administrative Sector Juliet Aseo,
and AGM for Charity Sector Larry Cedro PHOTO BY ERICSON DELOS REYES
Under the Philippine Charity Sweepstakes Office’s (PCSO’s) charter and the
existing National Internal Revenue Code (NIRC), PCSO lotto prizes are tax-exempt,
“However, your tax-free winnings is gone, the PCSO charter has now been changed
by the TRAIN law,” Galban said.
The TRAIN law is the first package of the Comprehensive Tax Reform Program
(CTRP) conceived by the Duterte administration, which aims to correct a number of
deficiencies in the tax system and simplify its scheme.
PCSO General Manager Alexander Balutan assures BIR of the strict observance of
the new tax system in the agency, moreover, encouraging everyone to support the
TRAIN Law
On December 19, 2017, Pres. Rodrigo Roa Duterte signed Republic Act RA 10963
or Tax Reform for Acceleration and Inclusion or the TRAIN law which provides the
increase in take-home pay of salaried Filipino by reducing income tax rates, while
increasing and rationalizing tax rates in other goods and services, one of which is
PCSO’s lotto prizes.
Whereas all winnings were tax-free before, starting January 2018, all PCSO lotto
prizes are taxed 20 percent if the amount of the prize or winnings is above P10,000.
BIR National Capital Region (NCR) Head Revenue Executive Assistant Marivic
Acosta-Galban (rightmost) explains the 20 percent tax in all lotto winnings under
the TRAIN Law
PCSO General Manager Alexander Balutan gladly appreciated the presentation of
Galban, to make the new tax system in the charity agency easier to understand, and
strongly assured BIR, that PCSO will strictly observe what the TRAIN Law dictates.
He also stated that PCSO will echo to its clients about the “Tax-Free No More” in
lotto winnings.
A Certificate of Appreciation was given to Galban after the TRAIN Law Forum to
acknowledge the BIR’s objective in making the TRAIN Law understandable to
PCSO and its clients.

8. TRAIN 2 to scrap P11.2-billion energy sector’s tax incentives

Published March 18, 2018, 10:01 PM
By Myrna M. Velasco
Roughly P11.2 billion worth of tax and import duty incentives for investments in the
energy sector will be scrapped under the propounded package 2 of the Tax Reform
for Acceleration and Inclusion (TRAIN) law of the Duterte administration.
In a presentation to industry stakeholders that will be affected by the tax package,
the Department of Finance (DOF) noted that this is part of the concerted effort of
the government to rationalize tax incentives being granted to various businesses.
For the energy sector alone, about 14 laws will be affected by the TRAIN-2 package,
chiefly impacting on policies and edicts that have been governing businesses and
investment flows in the oil and power sectors.
At this stage, it was indicated that the major laws to be affected will be the franchise
of the National Grid Corporation of the Philippines (NGCP) of which tax payment
structure will likely be modified; as well as the value-added tax (VAT) zero rating
treatment prevailing in the renewable energy (RE) sector.
Under the TRAIN-1 package deliberations, the RE developers have fiercely lobbied
that their VAT zero rating tax privilege be sustained because this could result in
higher electricity rates if the policy shifts.
Nevertheless, it is apparent now that the DOF has not exactly given up on such policy
proposition, thus, chipping away this tax privilege is now being incorporated in the
second tax package.
In a correspondence lodged with Congress, various groups of RE developers
indicated that the zero-VAT regime “is a necessary component of the fiscal
incentives package enabling the RE industry to provide clean, sustainable and lower
cost of electricity to end-consumers.”
Under Section 15 (g) of Republic Act 9513 or the Renewable Energy Act, it was
stipulated that “the sale of fuel or power generated from renewable sources of
energy, such as but not limited to, biomass, solar, wind, hydropower, geothermal,
ocean energy and other emerging energy resources such as fuel cells and hydrogen
fuels, shall be subject to zero percent (0%) value-added tax (VAT).” That is pursuant
to the provisions of the National Internal Revenue Code of 1997.
RE project developers have reiterated that changing the tax regime “will have the
effect of increasing the price of electricity from RE sources and negate the state
policy of promoting RE development.”
They added that such will also render “renewable energy projects uncompetitive and
even more expensive rather than fossil fuel power plants.”’
The earlier proposal had been to rationalize the taxation system for RE projects, from
being VAT zero-rated to having VAT exemption.
Tags: Department of Finance, energy sector, National Grid Corporation, renewable
energy, tax incentives, tax package, TRAIN 2 to scrap P11.2-billion energy sector’s
tax incentives, Value-added tax, VAT zero rating

9. Senate committee to probe new threat vs BPO sector

This comes after a Malacañang veto effectively raised the cost of doing business in
the Philippines, says Senator Paolo Benigno Aquino IV
TRAIN EFFECTS. The Senate Committee on Science and Technology is set to
probe tax reform effects on the Philippine BPO sector. File photo by AFP
TRAIN EFFECTS. The Senate Committee on Science and Technology is set to
probe tax reform effects on the Philippine BPO sector. File photo by AFP
MANILA, Philippines – The Senate Committee on Science and Technology is set
to investigate the threat of the Philippines' new tax reform law to the business process
outsouring (BPO) sector, said Senator Paolo Benigno "Bam" Aquino IV on Sunday,
March 11.
"After receiving reports that the BPO sector may need to reduce their workforce or
set aside expansion plans in the country, Senator Bam set a second hearing on the
issue on Monday, March 12," Aquino's office announced.
What TRAIN threats? Malacañang earlier vetoed the tax reform law provision
retaining the special tax rate for BPO regional operating headquarters and regional
headquarters workers.
Aquino pointed out that Malacañang's veto effectively raised the cost of doing
business in the country, so BPO companies may "relocate, abort expansion, or re-
shore" their employees.
When the Tax Reform for Acceleration and Inclusion (TRAIN) Law was tackled in
Congress, Aquino had pushed for the retention of a special tax rate for regional
operating headquarters and regional headquarters.
Why it matters: Hundreds of thousands of Filipinos work in BPO firms, with the
Philippine BPO sector known as one of the fastest growing industries in the region.
It has been described in the ASEAN Briefing as a "key developing industry" for the
country's low cost of living and the young and educated Filipino workers who speak
good English.
The National Economic and Development Authority (NEDA), in its recent analysis
of the country's Gross Domestic Product, noted that the sector's growth rate has
reached a plateau, after a 6-year meteoric rise.
"The BPO sector is a major source of livelihood for Filipino families. We cannot
afford to give away job security and job opportunities, especially with the rising
prices of goods," Aquino said. – Rappler.com

10. TRAIN law ‘quite successful’ so far: DOF exec

By Azer Parrocha, Philippine News Agency on March 2, 2018
DOF Undersecretary Karl Kendrick Chua said the first tax reform package helped
increase Filipino workers’ take-home pay, kept revenue collections on target, and
held inflation rates manageable in the first two months of its implementation. (Photo:
Dr. Karl Kendrick Chua /Facebook)
DOF Undersecretary Karl Kendrick Chua said the first tax reform package helped
increase Filipino workers’ take-home pay, kept revenue collections on target, and
held inflation rates manageable in the first two months of its implementation. (Photo:
Dr. Karl Kendrick Chua /Facebook)
MANILA – A Department of Finance executive on Thursday described the
government’s implementation of the first package of the Tax Reform for
Acceleration and Inclusion (TRAIN) as “quite successful.”
DOF Undersecretary Karl Kendrick Chua said the first tax reform package helped
increase Filipino workers’ take-home pay, kept revenue collections on target, and
held inflation rates manageable in the first two months of its implementation.
“Well, I think in general, it was quite successful. We give PHP 10 billion per month
at least to working people and that’s fuelling a lot of the positive consumer
expectation,” Chua said in a Palace briefing.
“The revenue collections in the first two months are on target, and our inflation has
remained manageable,” he added.
Chua said his agency would continue to monitor and ensure that the fruits of TRAIN
would be “well-spent.”
He also said that TRAIN is unlikely to be the reason for the higher inflation because
most firms selling alcohol, tobacco, sugar sweetened beverage, oil, are still selling
old stocks which they bought in 2017, and should not be levied on the higher excise.
If there is any higher inflation seen, Chua said it’s “probably due to other reasons”.
No big challenges
Chua said there were no “big challenges” on the implementation of TRAIN’s first
package, noting that it took 18 months to prepare the program and was properly
consulted to all sectors involved.
If there were challenges then, Chua assured they would be “easy to address”.
“I would like to assure the public that this TRAIN has been well studied, well
consulted, and the inflation is very well manageable,” Chua said.
“Well, kung walang challenge ang isang reform, hindi siya tunay na reporma. So,
may challenge talaga. Pero ang nakikita namin ay balanse kasi iyong aming
mungkahi (Well, if a reform doesn’t have challenges, it’s not real reform. So, there
are challenges. But we can see that our proposal is balanced),” he added.
Chua assured that there were “other ways” to help the poor in case inflation increases
such as the conditional cash transfer (CCT), rice subsidy, and pledged pursuing rice
tariffication so that rice price will fall by up to PHP7 per kilogram.
The DOF official said that overall food inflation is higher at 4.52 percent.
However, rice is still low as of January at 1.4 percent.
At present, he said the only product in the food basket higher than 10 percent which
is a cause for concern is fish, attributing its effect to the inclement weather
experienced last December.
Chua said the finance department considers the real driver of higher inflation, aside
from possible profiteering, is the tobacco industry’s payment of right taxes.
“Tobacco inflation actually in January was 17.4 percent when we expect it only to
increase by 8 percent,” Chua said.
Moreover, he also cited “a period of very high oil price” as another factor.
“Oil price went down and started to go up in the last three years. What really
happened was when diesel increased from 18 pesos to 32 pesos between January of
2016 and January of 2017, that 14 pesos is at 76 percent increase in the diesel price,
we did not see any of the key commodity items skyrocket,” Chua said.
Chua, meanwhile, expressed high hopes that the second TRAIN package will be
passed this year.
The DOF expects the second package to be passed in the first quarter of 2018.
“Well, iyong Kongreso kasi dadaan sa mahabang hearing eh. So, siguro ang gusto
po namin sana ay bago magtapos po iyong taon ay maipasa na po iyong second
package (Well, this will go through a series of hearings in the Congress. So, maybe
we hope that the second package will be passed before the year ends),” Chua said.
Chua assured that the government will listen to various sectors to gain more insights.
(PNA)