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JMJ Marist Brothers

NOTRE DAME OF MARBEL UNIVERSITY


Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the
Government Workers’ Purchasing Power in Koronadal City

PA 250: Advanced Research and Statistical Design

ACOSTA, Kim Anthony N.

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 1
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

CHAPTER I

Background of the Study

In the epoch of fiscal crises, the ideas of tax reform had once taken center stage thus
yielding the Philippines to undergo major resurgence towards its taxation system with the newly
amended Tax Reform for Acceleration and Inclusion (TRAIN) Law. On December 19, 2017,
President Rodrigo R. Duterte signed into law the Package 1 of the Comprehensive Tax Reform
Program (CTRP) also known as the Tax Reform for Acceleration and Inclusion (TRAIN) as
Republic Act No. 10963. The Law took effect on January 1, 2018 which aims to make the
Philippine Tax System simpler, fairer, and more efficient to promote investments, create jobs and
reduce poverty. It also hopes to provide an increase in the take-home pay of salaried Filipino by
reducing income tax rate while increasing and rationalizing tax rates in other goods and services.
Along with these objectives, the CTRP also aims to raise revenues to help fund the President’s
“Build, Build, Build” Program which will give sustainable and inclusive growth and finance
investments through enhanced education, health and social services. Several changes were made
to our tax system including reduction of personal income taxes, higher excise taxes on
automobiles, petroleum products, tobacco, sugar-sweetened beverages and other non-essential
goods, reduction of donor’s and estate taxes to a 6% flat rate, and ease of documentary
requirements. The legislators intended that with the people’s support, all these reforms will
ultimately result in lower prices for higher purchasing power, greater government income, more
job opportunities, massive infrastructure, better health and a brighter future for each and every
Filipino. (Rodriguez, 2018)

However, most people are now clamoring for lesser excise tax for petroleum services and
sugar-sweetened beverages. The increase in petroleum prices led to an increase in the prices of
goods and services, falling on the shoulders of consumers, especially the poor. For someone who
drives almost daily, I could very well imagine how taxi drivers might be dealing with gasoline
prices that spiked to a record-breaking P60.87 in October 2018. Household budgets bought fewer
and fewer groceries. Restaurants started skimping on portion sizes or simply charged more. The

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 2
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

answer lies in whether or not there has indeed been an improvement in the effective purchasing
power of Filipinos. Purchasing power is an important indicator of the economic condition of the
nation. All else being equal, inflation decreases the amount of goods or services one is able to
purchase; and reduced purchasing power leads to a decrease in living standards. In October 2018,
inflation hit 6.7%, moving even further away from the Bangko Sentral ng Pilipinas’ target range
of 2-4% for 2018. Although the causes include world oil prices or other forces, it is clear that the
rise in inflation was partly caused by TRAIN. Adding fuel to the fire, whereas the higher excise
taxes targeted the rich, the increase in prices hurt the poor the most. Hence, the wide gap
between the rich and the poor remains. Although the increase of sugar-sweetened beverages was
for the better health of Filipinos, many were not pleased about the substantial increase to its
prices. Burdened by the price shock, there was an uproar from citizens seeking the suspension of
the law. (Gimena, 2018)

The most popular part of the TRAIN law is the reduction of personal income tax of a
majority of individual taxpayers. Prior to the enactment of the new law, an individual employee
or self-employed taxpayer would normally have to pay income tax at the rate of 5% to 32%,
depending on one's bracket. Under TRAIN, an individual with a taxable income of P250,000 or
less will now be exempt from income tax. Those with a taxable income of above P250,000 will
be subject to the rate of 20% to 35% effective 2018, and 15% to 35% effective 2023. Moreover,
the deductible 13th month pay and other benefits are now higher at P90,000 compared to
P82,000 under the old law. (Gialogo, 2018)

In response to this problem, I suggest that lawmakers should reevaluate the said existing
law to make sure that no one is left behind. They should find ways to mitigate the negative
effects of the TRAIN Law, especially to the poor in Koronadal City. For a government auditor
like me, it seems that TRAIN Law have both positive and negative impact. In the course of our
work, the economic effect looks better due to the increase in net take home pay. But due to
parallel effect in prices of goods and services, we could not almost feel its positive effects.
Notwithstanding its drawbacks to most consumers of this region, I hope that tax reforms will
produce more benefit than harm, and that such advantages will trickle down to ordinary people

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 3
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

sooner. Periodically reviewing the effects of the law is the key, along with efficient execution, to
ensure that tax collection is indeed put to good use.

Review of Related Literature

Mangondato, Cabalida, Ibrahim, Mimbantas, Sagarino and Maneja (2019) conducted a


study about “Effects of Tax Reform for Acceleration and Inclusion Law to the Sales in Pala-o
Public Market” using survey questionnaires in collecting the data from selected respondents and
interview method to assess the insights of the respondents towards Tax Reform for Acceleration
and Inclusion (TRAIN) Law. They found out that the mostly affected by TRAIN Law were rice
retailers, grocery/sari-sari stores and meat shops. There was also a decrease of sales after the
implementation of the said law. They also cited that most of the store owners in Pala-o Public
Market are not aware or has no knowledge of the implementation of TRAIN Law and its effects
to their sales performance. Thus, the researchers concluded that taxes levied on other goods and
services tend to increase the price of the products but not all store owners are aware about it.

Statement of the Problem

This study aims to find the different effects of Tax Reform for Acceleration and Inclusion
(TRAIN) Law to the government workers’ purchasing power in Koronadal City. It seeks to
answer the following questions:

1. How does TRAIN Law affect the government workers’ purchasing power in Koronadal City?

Theoretical Framework

Figure 1: The conceptual framework of the study

Government Purchasing
TRAIN Law
Workers Power

This study shows the Impact of Tax Reform for Acceleration and Inclusion (TRAIN)
Law to the Government Workers’ Purchasing Power in Koronadal City. The study aims to asses
if there was change in the government workers’ purchasing power before and after the
implementation of the aforementioned law.

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 4
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

Respondents’ Inclusion Criteria

Respondents of this study are only limited to permanent government workers in different
sectors of government agencies in Koronadal City. They should be at least 1 year as permanent
employee, must be residing in Koronadal City and must be of legal age.

Significance of the Study

This research study about the newly implemented Tax Reform for Acceleration and
Inclusion (TRAIN) Law and its effects to the purchasing power of government workers can be a
good paradigm for economic and social stability in Koronadal City. It would be beneficial to the
following:

 GOVERNMENT WORKERS. It will identify the factors affecting the government


workers’ purchasing power through salary budgeting and expenditure planning as well as
products/services price variations due to the implementation of TRAIN Law.

 CONSUMERS. This research is of great help to the consumers for it provides a further
knowledge about the resurgence of the Philippine taxation system together with its effects
to the market economic traits in their daily living.

 PROVIDERS/BUSINESSES. This study is useful to providers/businesses because it


will help them know and understand the effects of TRAIN Law that will increase their
level of awareness towards the newly implemented taxation structure in our country.

 FUTURE RESEARCHERS. This study will be beneficial to the future researchers for it
will determine not only the effects of TRAIN Law but as well as its role to a wide variety
of economic activities.

Scope and Limitation

This study only focuses on the Impact of Tax Reform for Acceleration and Inclusion
(TRAIN) Law to the Government Workers’ Purchasing Power in Koronadal City. The researcher
will conduct a survey limited only to permanent government workers in Koronadal City. The
researcher will use Descriptive and Correlational Research Design.

Definition of Terms

Government Workers – an individual who works part-time or full-time in the government


under a contract of employment and has recognized rights and duties. (Business Dictionary,
2019)

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 5
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

Purchasing Power – is the value of a currency expressed in terms of the amount of goods or
services that one unit of money can buy. It is important because, all else being equal, inflation
decreases the amount of goods or services you would be able to purchase. (Investopedia, 2019)

TRAIN Law – 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. (Gialogo, Rappler 2018)

Inflation Rate – is a quantitative measure of the rate at which the average price level of a basket
of selected goods and services in an economy increases over a period of time. It is the constant
rise in the general level of prices where a unit of currency buys less than it did in prior periods.
(Investopedia, 2019)

Tax – is a compulsory financial charge or some other type of levy imposed upon a taxpayer (an
individual or other legal entity) by a governmental organization in order to fund various public
expenditures. A failure to pay, along with evasion of or resistance to taxation, is punishable by
law. (Investopedia, 2019)

Ethical Considerations

The researcher cited the three (3) ethical considerations of this study given the constraints
in data collection (Scott, P. A.):

 Informed Consent - research participants are adequately and properly informed


regarding the nature of the research project including the approximate time requirement,
number of questions in the survey questionnaire and so forth.

 Confidentiality - the respondents are assured that his/her participation, responses,


confidential information and so forth are being used for the purposes of this research
only.

 Respects for persons – respondents, as autonomous beings, have the right to decide
whether or not they get involved in this research.

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 6
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

CHAPTER II

Research Design

This study used Descriptive Research Design in interpreting the data. The Descriptive
Method was used to describe the government workers’ purchasing power and perception about
TRAIN Law. The researcher also used Correlational Method to determine the relationship
between Tax Reform for Acceleration and Inclusion (TRAIN) Law and government workers’
purchasing power. The researchers also used survey questionnaires in collecting the data from
selected respondents to assess the insights of the respondents towards Tax Reform for
Acceleration and Inclusion (TRAIN) Law.

Research Locale

South Cotabato’s Center for finance, business, education, services and government
institution, Koronadal City has advanced itself to become the capital city of the province while
being named as the new seat of Region XII or SOCCSKSARGEN. Koronadal boast of its
favorable geographical location, rich human and natural resources, and potentials conductive for
trade business and Industry. It is endowed with scenic spots with high potential for tourist
attractions. It is now an important hub of commercial, industry and other socio-economic
activities. It enjoys the distinction of having been identified as the Agri-industrial Center of the
Province of South Cotabato, which made it a lead center for industrialization, acting as catalyst
for development particularly in the second district of South Cotabato. (Koronadal LGU, 2019)

Figure 2: Map of Koronadal City


Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 7
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

The Philippine Government Structure is composed of three (3) different sectors namely:
National Government, Local Government and Corporate Government Sectors. These
government sectors are composed of different agencies as shown in Figure 3. (COA, 2019)

Figure 3: Examples of Philippine Government Agencies

Research Instrument

The instrument used to accumulate information is survey questionnaire in collecting data


for this study. It contains a combination of 10 questions relative to quantitative approach related
to this study. It includes a specific place and space in the paper where the respondents will write
their answers to the questions. The researcher asked questions about the top 5 products/services
they think have price increased after implementing TRAIN Law and how these products/services
increase their expenses and decrease their budget, change on their personal income tax before
and after its implementation, and other economic and social concerns.

Development of Research Questionnaire

To develop the research instrument which is the survey questionnaire, the researcher
should always know the purpose of the instrument, its advantages and disadvantages, approaches
and steps to be taken. The purpose of the survey questionnaire is to discover the Impact of Tax
Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’ Purchasing
Power in Koronadal City. To develop the research instrument, the researcher will also follow
these steps: (a) Identify the goal of the survey questionnaire; (b) Choose what type of questions;
(c) Develop questions for the survey questionnaire (d) Ensure to protect the respondents’
privacy. The researcher used a mixed questionnaire which is a combination of open-ended and

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 8
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

close-ended questions, wherein the respondents were free to express their views and opinions.
(Mangondato et. al., 2018)

Data gathering procedure

The researcher used survey questionnaires as a mean of gathering the data that was
needed for this research. The survey questionnaire was made up of questions related to the
statement of the problem. It was then validated and revised before the actual data gathering and
distributed to the respondents for them to answer. The survey questionnaire was then retrieved
and the result of the survey was tabulated. Lastly, the tabulated results were interpreted.

Figure 4: The Data Gathering Procedure of the Study

With the research design applied, the method of data gathering is by conducting a survey
with the use of a questionnaire. The researcher visited and interacted with the respondents from
different government agencies to answer the administered questions on the Impact of Tax
Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’ Purchasing
Power in Koronadal City. The researcher gathered data using the same questionnaires to all
respondents.

The sampling design that is used by the researchers in this study is Quota Sampling
Method. This method let the researcher select the first available subject who meets the criteria
out the population divided into groups. The government agencies were divide into 3 strata called
Sectors namely National Government Sector, Local Government Sector, and Corporate
Government Sector. According to the Civil Service Commission XII, there is a total estimated
10,000 permanent government employees in Koronadal City. Out of the 9,000 population size,
the total sample size was 101 respondents. The 99 respondents were distributed equally to the 3
strata which resulted to 33 respondents per sector. The respondents shall then be pre-qualified

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 9
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

based on their age ranged from 30 to 60 years old. The sample of the respondents will be
determined by the Slovin’s Formula as shown in Figure 5.

Slovin’s Formula:
n = sample size
𝑵 N = population size
𝒏= 𝟏+𝑵𝒆𝟐 e = margin of error
𝟏𝟎, 𝟎𝟎𝟎
𝒏=
𝟏 + 𝟗, 𝟎𝟎𝟎(. 𝟏𝟎)𝟐

𝒏 = 𝟗𝟗
Figure 5 : Computation of Sample Size based on Slovin’s Formula

Therefore, there should be 101 government workers as the respondents for the survey.

Data analysis

After the data gathering, the researchers had tabulated, analyzed and interpreted the data using
the following statistical methods and techniques shown below:

1. Frequency and Percentage

This method was used to summarize the gathered data from the survey questionnaires that the
respondents answered.

2. Mean

This method was used to determine the average scale of the given answers or data by the
respondents.

3. T-test

This method was used to determine the effect of TRAIN Law before and after its
implementation.

4. Slovin’s Formula

The Slovin’s formula is used to determine the number of samples to be used as respondents for
both the quantitative data gathering.

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 10
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

REFERENCES Mangondato, Cabalida, Ibrahim, Mimbantas,


Sagarino and Maneja (2019) Effects of Tax
Reform for Acceleration and Inclusion Law
Commission on Audit (2019) List of to the Sales in Pala-o Public Market
Government Agencies in the Philippines Retrieved on July 11, 2019 from
https://coa.gov.ph/listofgovernmentagenciesi https://journamangondatol.pdf
nthephilippines
Rodriguez, T.A. (2018) Tax Changes You
Creswell (2010) Research Assignments Need to Know
Retrieved on July 11, 2019 from Retrieved on July 11, 2019 from
https://prudencexd.weebly.com/ www.ntrc.gov.ph/images/Publications/train/t
ax-changes-you-need-to-know.pdf
Dascil, R.T. (2018) Tax Reform
Acceleration and Inclusion (TRAIN) Law Scott, P. A. (2013) Ethical Considerations
Retrieved on July 11, 2019 from Retrieved on July 11, 2019 from
https://www.senate.gov.ph/trainlaw https://pdfs.semanticscholar.org/4a92/c8884
51db89d4089a8adba23b5420e935499.pdf
Gialogo, E.G. (2018) Train law: What does
it change? Survey Sampling Methods. (n.d.). Retrieved
Retrieved on July 11, 2019 from from
https://www.rappler.com/thought- https://www.statpac.com/surveys/sampling.h
leaders/192873-train-tax-reform-law-what- tm
does-it-change-explainer
Villar, C.T. (2018) The Impact of Tax
Gimena, A.C.D. (2018) Revisiting TRAIN Reform for Acceleration and Inclusion
Law (TRAIN) on Philippine Agriculture
Retrieved on July 11, 2019 from Retrieved on July 12, 2019 from
https://www.bworldonline.com/revisiting- https://www.senate.gov.ph/theimpactoftaxre
the-train-law/ formforaccelerationandinclusion(train)onphi
lippineagriculture

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 11
JMJ Marist Brothers
NOTRE DAME OF MARBEL UNIVERSITY
Integrated Basic Education Department – Graduate School
City of Koronadal, South Cotabato

Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law to the Government Workers’
Purchasing Power in Koronadal City Page 12

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