Over the years, the Philippine tax system has been described as ‘unfair’, ‘corrupt’, and ‘complicated’ among other distressing adjectives. Congress has put forth numerous bills and exchanged multiple arguments to revamp the prejudiced Tax Reform Act of 1997, but it was only in December 2017 that it finally passed a new bill that promised to change the lives of the Filipino people no matter what state of living they currently belong to.
In an attempt of President Rodrigo Duterte to drastically change the Philippine tax system, Republic Act 10963, better known as Tax Reform for Acceleration and Inclusion (TRAIN), emerged as the first package of the Comprehensive Tax Reform Program which seeks to provide a higher amount of take-home pay by reducing the income tax of taxpayers and families alike. In addition, the law envisions an increased economic activity in proportion to the internal revenue system since greater excise tax on daily commodities will also be imposed.
To break down TRAIN’s benefits and the aftermath following its initial implementation, The LaSallian interviewed Dr. Tereso Tullao Jr., University Fellow and Director of the Angelo King Institute for Economic and Business Studies.
Notable imposed changes
The TRAIN law demands changes among the following fields: Personal and passive income, sweetened beverages, estate, fuels, tobacco products, coal, vehicles, aesthetic cosmetic procedures, value-added tax, penalty interest, and donations. Notable changes are observed in the following:
As for the change in personal income, this will be most beneficial for families with an annual taxable income of P250,000 since they will be exempted from income tax. Furthermore, bonuses and thirteenth-month pay are tax-exempt if they amount to P90,000. Albeit under the old taxcode, sweetened beverages were not taxed, the TRAIN now imposes for caloric and non-caloric sweeteners to be charged P6.00 per liter while high-fructose corn syrups will be charged P12.00 per liter.
Another commodity affected is fuel. While it is true that oil price hike is caused by an increase in demand, decrease in supply, or dictated by the global market, the TRAIN law imposes P1.50 charge per year for gasoline and P1.00-2.00 charge per year for diesel.
Because of TRAIN, estate taxes and donor’s taxes seemed to have lowered the rate of estate tax to a flat rate of six percent instead of the five percent of twenty percent of the deceased person’s estates. Last but not least, the imposed changes on tobacco tax will follow after the 2012 sin tax law, with an increase of P2.50 in the succeeding years.
Experiencing post-TRAIN changes
Though the Duterte administration had noble intentions in mind with the implementation of TRAIN, some citizens remain wary of the changes it has brought about. One of the foremost concerns in the aftermath of the law’s implementation is centered on the sudden surge of fuel prices and its implication on the fares of fuel-reliant public transportation methods like jeepneys and buses.
For Joshua Layos (II, BS-MS AEC), commuters like him will feel the impact of TRAIN on the transportation sector the most. “Assuming that all else are constant, if the price of gasoline goes up, the drivers of public transportation vehicles will be forced to increase their fare in order to compensate for the increase in the price of gasoline,” he explains. His sentiments are echoed by fellow student Kyla Deonoso (II, OCM-MKT), whose daily commute to and from Novaliches involves the use of the FX and tricycle, which may be subject to potential fare hikes. “This means that I will have to explore cheaper yet more time-consuming methods for transportation to be able to stay within budget or settle for less food to save up for transportation,” she lamented.
According to Dr. Tullao, the concerns of commuters like Layos and Deonoso are to be expected as the rising price of fuel products can be grounds for fuel-reliant public utility vehicle (PUV) operators to file for an increase in fare, though it will still subject to government regulation. On another note, he does see this as an opportunity for vehicles using alternative energy sources to emerge in the market. “This is an avenue where the electric cars may substitute inefficient cars and jeepneys,” adds Dr. Tullao.
With regard to the other objective of TRAIN to promote healthier choices among Filipino consumers by taxing certain sweetened beverages and tobacco products, varied sentiments have been expressed as to whether or not higher pricing is enough to discourage consumers from purchasing these products. Research has shown that while consumers are sensitive to price changes, they also account for other factors in ultimately deciding to purchase a product.
As Brian Chan (III, BS-MS AEC) argues, the government should not stop at increasing prices of “sin products” if it truly aims to improve healthcare among citizens. “I think the imposition of higher pricing is a start towards the right direction, [but] the government must be able to emphasize [working] towards better health services and programs for people to be healthier citizens,” he expounds.
What TRAIN law should focus on
Discourses have been exchanged as social media is bombarded with questions on whether the TRAIN law is meant to generate income for the government or for the betterment of the Philippine economy. Coming from an economic perspective, Tullao reveals there is indeed an underinvestment in infrastructure, education, and other key areas.
“The Philippines is known for underinvesting in everything. Name it, we’re underinvesting whether it’s sports, whether it’s music, whether it’s research on volcanology but of course the government should list the priority of projects,” Tullao enumerates. “Initially, the spending on infrastructure projects will have a multiplier effect and in the long run, the capacity of the economy is improved because of the enhanced and improved infrastructures. Second, they can use the tax revenues to fund improvements in the human capital—education,” Tullao adds on how the government should prioritize allocating the generated income from TRAIN law.
In reality, the government revealed that the income from TRAIN law would be for the funding of the “Build, Build, Build” program and other projects uncited. In context, infrastructure plans including flood control and urban water systems, airports, railway investments, road networks, and public transports are believed to be part of the “Build, Build, Build” program which had been foreseen to drive gross domestic product (GDP) growth this 2018.
Is it really anti-poor?
Various figures over the country, be it from the religious sector, the academe, or even the regular ton have conducted whether this law is actually for the benefit of obtaining a positive and radical economic growth or not. Bishop Broderick Pabillo of the CBCP Episcopal Commission on the Laity Chairman at Manila Auxiliary claims that the TRAIN law is “the biggest calvary” to the poor. He reasoned out that the decrease in income taxes does not compensate for the increase in value-added taxes (VAT).
It can also be observed likewise in the University of the Philippines-Diliman (UPD) as its students rallied in hopes of junking the law. Excise taxes have been imposed inside the university as meals and drinks went up for as much as five pesos more than the regular prices.
Statistics have also been provided by IBON Foundation, an independent research group which aims to inform Filipinos about socio-economic implications in Philippine context. They found that 15.2 million Filipino families will not enjoy the same benefits as compared with the remaining 7.5 million taxpayers; reasoning out that the former are just minimum wage earners with inconsistent income.
As for Dr. Tullao, he believes that the newly imposed bill is not anti-poor. For him, TRAIN law precludes everyone to have equal benefits regardless of what state of living they currently belong to. Employees with fixed rate of income will still “receive the same income but the tax rate of the commodities they consume [will increase].” Bottomline, the TRAIN law benefits the employed ton and does otherwise for the unemployed and those with fixed income.