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The Tax Reform for Acceleration and Inclusion


(TRAIN) Law:
A Primer/Guide to understanding the New Tax
Reform Law

This primer is an alternative learning material for mass-reading and


popularization. This is released by Kilusan para sa Pambansang Demokrasya-
Cebu (KILUSAN-Cebu) to facilitate the understanding of each Filipino on the
TRAIN Law (its features and agenda) and guide each Filipinos to arrive at a clear
standpoint and viewpoint on the TRAIN Law most especially taking in
consideration the perspective and interest of the marginalized and the
vulnerable sectors of our society. This primer aims to critically put forward our
analysis and carry out our collective stance on the issue at hand.

We encourage all readers to pass this on after reading.


WHAT IS THE TRAIN LAW? (An Introduction)
1. Personal Income tax—Tax exemption for annual tax income below P250,
The Tax Reform for Acceleration and Inclusion Law or the TRAIN Law was signed 000. For over P250, 000-P8 million will be lower ranging from 15% to 30%
into law by Duterte on December 19, 2017 in Malacanang. This law will be while for over P8 million a higher tax rate of 35%.
implemented in stages or packages. The first package was implemented on
January 1, 2018 while the rest of the packages will be implemented every year 2. Sweetened Beverages tax—Increase of P6 per liter on drinks using
thereafter. This New Tax Reform Law however, amended or invalidated a few artificial sweetener and P12 per liter on drinks containing high-fructose
corn syrup. Tax exemption for 3-in-1 coffee and milk.
provisions of the RA 8424 or the National Internal Revenue Code of 1997.
3. Petroleum Excise tax--P2.50-P8 tax per liter for Diesel, Gasoline, Bunker
fuel oil, and other petroleum products.
The Duterte Government needs a total of eight trillion pesos (Php8.2T) for the
promised projects to be implemented in 5 years-time (2018-2022). On the other 4. Automobile Excise tax—Ranges from 2% to 50 % price hike on
hand, the Duterte Government was promised to access loans from China, Japan, automobile.
Korea, Canada and US, oftentimes, at the expense of the majority of the Filipino
people. With the new tax reform law, the Duterte Govt. is projecting to raise an 5. Sin tax on cigarettes—an increase of excise tax on cigarettes P35 for 2018;
additional P133B from the tax collection every year until 2022. P37.50 for 2020; and P40.00 for 2022. By 2024, the rates will be increased
annually by 4%.
The TRAIN LAW has 5 packages:
Package 1A-Reduction of 6. Coal tax—Imposing tax on both domestic and imported coal for P50.00
Income Tax and Package 1B- per metric ton. Expected increase of P50.00 per metric ton every year
until January 1, 2020, as it reaches P150.00 per metric tons.
Broadening of the consumption
tax (VAT and excise); Package 2-
7. Mining excise tax—A double increase (4%) of excise tax for all non-
Corporate Income Tax Reform
metallic minerals and quarry resources, as well as all metallic minerals –
and fiscal Incentives; Package including copper, gold, and chromite.
3-Property taxation; Package 4-
Pasive Income and Financial 8. Cosmetic surgeries—5% tax will be imposed on gross receipts of non-
taxes and Package 5-on Fatty essential cosmetic surgery intended for aesthetic purposes only.
Food tax and other luxury tax.
(See Diagram 1: packages of Diagram 1: Packages of the TRAIN LAW 9. Estate tax and Donor’s tax—6% estate tax from the net value of the estate
the TRAIN LAW) with standard deduction of P5 million for family income. Tax exemption
for over P10 million worth of family income. 6% donor’s tax for over P250,
WHAT ARE THE TYPES OF TAXES/AREAS COVERED BY THE TRAIN LAW? 000 gifts regardless of relationship to the donor.
Second
10. Value Added Tax—Exclusion of government-owned and controlled Decrease in the ability of consumer’s purchasing power. Cut-off of some
corporations, state universities and colleges, and national government family budget for food and other allowances in the household to adjust
agencies from the 12% VAT. raising prices in the market.
Third
Narrowing priorities of the family household such as compromise the
better quality of life they deserve. It leaves the Filipinos losing their
confidence on the social system.

UNDER THE TRAIN LAW, HOW DOES PERSONAL INCOME TAX RELATE TO THE
INCREASE OF EXCISE TAX?

Household expenses will definitely increase, take-home pay from the gain of the
exemption of Personal Income Tax (PIT) will be rendered inutile because family
income even among those earning at P22, 000/month will be insufficient for the
family’s needs. From among the informal sectors (vendors, drivers, peddlers
and other vulnerable sectors), they do not gain from the TRAIN Law specifically
from the PIT exemption because they surely have much to lose in the increase
of excise tax i.e. additional burden of more capital-build up or a decreasing take-
WHAT ARE THE EFFECTS OF FUEL PRICE INCREASE IN FILIPINO HOUSEHOLDS?
home income.
Contrary to objective of the TRAIN Law to make the tax system simpler,
fairer, and more efficient to provide the most benefits to the people, it Analyze on the following:
only:
An average family of five, needs a total of P20,000 (if living in Central Visayas) with
First
an expenditure of P19,000 per month, according to NEDA1 but this survey results
Increase the price of basic commodities while wages for workers remain
the same. is based on the inflation for the two reference years using the 2006 prices!

1
https://www.psa.gov.ph/content/average-family-income-2015-estimated-22-thousand-pesos-
monthly-results-2015-family-income
Even the government under earners, informal workers and the
the AmBisyon Natin 2040 bottom 5 of the Income Decile3 do
recognizes that a Filipino not benefit from the TRAIN Law.
household of 4 should have a
gross monthly income of
P120,000 to live a "simple,
comfortable life," which
WHAT ARE THE IMPACT OF FUEL
entails owning a car and a
PRICES ON THE TRANSPORT
medium-sized house, traveling
SECTOR?
occasionally, as well as
sending 2 children to college, a  Jeeps typically consume 25
survey conducted by liters of diesel/day. At P30.30/L (Dec. 2016 prices), a PUJ driver spends
the National Economic and P758/day on fuel. The proposed 3-peso excise tax will mean 11.1%
Diagram 2: (Rappler) visualization of NEDA's estimate of Total
Development Authority Family's Income in 2018 increase in their fuel expenses or an additional 84 pesos! Likewise true to
(NEDA) showed in June 20182. Bus drivers.
 Taxis run on gasoline. The proposed 2.7-peso excise tax on the 45.98/L
Under the TRAIN Law, the government reports above-mentioned will just be an
(Dec. 2016) will mean 6.6% increase in their fuel expenses. This is also
illusive hope for most Filipinos from among the middle class and very
true to tricycle drivers.
unfortunate for the rest of the lower classes most especially among the poor
and marginalized. WHAT IS THE EFFECT OF TRAIN ON ELECTRICITY EXPENSES4?
• Based on these estimates, paying an extra 14 centavos/kWh this year, 21
DID ALL INCOME-EARNERS BENEFIT FROM THE TRAIN LAW, OR LEFT SOME
centavos/kWh in 2019, and 27 centavos/kWh in 2020 might appear small
PEOPLE EVEN FAR BEHIND?
for those consuming only 200 kWh/month.
Those who benefit from the TRAIN Law particularly from the Personal Income
• This consumption level implies that a household doesn’t have any air-con
Tax exemption are among the Middle-income earners, professionals and top
but maintains a small refrigerator and a few electric lights may have to
executives. Those from the rest of the population who are Minimum-wage-
pay an extra P28/month, P42/month and P54/month in 2018, 2019, and
2020, respectively.

2
https://www.rappler.com/business/economy-watch/137891-ideal-monthly-income-neda-2040-
4
vision Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of
3
*POOREST DECILE:D1 – Subsistence Poor, D2 – Subsistence Poor, D3 – Poor, D4 – Near Poor, D5 – Economic Freedom Network (EFN) Asia:
Near Poor
• But that is only for direct household electricity consumption. Filipinos express resentment to the increasing prices of commodities in the
market.
• People who live in those small houses may work and/or purchase services
in factories, schools, and universities, shops and malls, hotels and
restaurants, hospitals and airports, etc. To allow the TRAIN Law to persist is to mislead the countries development and
giving the heaviest burden to the poor families. Indeed, contrary to the
• These enterprises consume tens of thousands of kWh per month and the President’s promise of “malasakit at tunay na pagbabago” for Filipinos.
additional electricity cost will be passed on to the consumers, which
might affect sales and hence, affect future salaries and benefits of We are losing sight of the genuine change.
workers.
WHAT IS OUR MOVE ON THE TRAIN LAW?
WHERE WILL THE REVENUE FROM TRAIN LAW GO?
Not more than 70% is earmarked for infrastructure projects such as, but not limited to, We move for a genuine progressive
the Build, Build, Build program. Not more than 30% will be used to fund social taxation. The TRAIN LAW is a
mitigating measures like the additional P200 unconditional cash transfer for the regressive taxation. For a progressive
poorest 10 million households, and other social welfare benefits and programs. taxation, the rich should be taxed
more than the poor but the TRAIN law
are cutting taxes on the rich and
WHY MUST THE TRAIN LAW BE A MATTER OF CONCERN FOR EVERYONE? adding up more burden of taxation on
the poor. The poor bear the greater
In the pursuit of Duterte burden under the TRAIN LAW. The
administration’s ambitious
"build, build, build" 40% Highest income Filipinos with a
infrastructure program, combined income of P4.1Trillion only bears
through the TRAIN Law it is 48 billion as net tax burden, only 0.8% of its
expected to raise government combined income of P4.1T while the 60%
revenue of P366 billion every poorest Filipinos with a combined income
year. This first package of the of P2.1T has a net tax burden of 47 billion
comprehensive tax reform pesos, 2.3% of its combined income.
program (CTRP) aims to fund
the Administration’s 10-point
Socioeconomic Agenda which supposedly will ensure Filipinos to have an
improved and adequate public services. However, in the present situation, many
References:

 https://www.psa.gov.ph/content/average-family-income-2015-estimated-22-thousand-pesos-
monthly-results-2015-family-income

 https://www.rappler.com/business/economy-watch/137891-ideal-monthly-income-neda-2040-
vision

 Bienvenido S. Oplas, Jr. is President of Minimal Government Thinkers, a member-institute of


Economic Freedom Network (EFN) Asia:

 http://primer.com.ph/tips-guides/2018/01/04/train-package-one-a-need-to-know-guide-to-
republic-act-10963/

 Kilusan Statement on the TRAIN Law

For more information and request for further


discussions on the TRAIN LAW and other socially-
relevant issues, contact 253-9682 or send
message to KILUSAN CEBU FB page or email at
kpd_n_cebu@yahoo.com
You may also text 0933-949-0921 (Bernard).

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