On December 19 last year, President Rodrigo Duterte officially signed his administration’s Comprehensive Tax Reform Program (CTRP) first package called Tax Reform for Acceleration and Inclusion (TRAIN) bill, now Republic Act (RA) No. 10963.
What is TRAIN?
TRAIN seeks to make the country’s tax system simpler, fairer and more efficient. It also includes mitigating measures that are designed to redistribute some of the gains to the poor.
How does it work?
As per Department of Finance, “Through TRAIN, every Filipino contributes to funding more infrastructure and social services to eradicate extreme poverty and reduce inequality towards prosperity for all.” Moreover, it has said to address several weaknesses of the current tax system through:
1.) Lowering personal income taxes (PIT)
“Those with annual taxable income below P250,000 are exempt from paying PIT, while the rest of taxpayers, except the richest, will see lower tax rates ranging from 15% to 30% by 2023. To maintain progressivity, the top individual taxpayers whose annual taxable income exceeds P8 million, face a higher tax rate from the current 32% to 35%.”
2.) Simplifying estate and donor’s taxes
“In the current system, the tax rates can reach up to 20% of the net estate value and up to 15% on net donations. TRAIN seeks to simplify this. Estate and donor’s tax will be lowered and harmonized so it does not matter if the person passed away, donated a property, or simply wants to transfer a property. This will result in lost revenues but the key here is to make the land market more efficient so that the land will go to its best use.”
3.) Expanding the value-added tax (VAT) base
“TRAIN aims to clean up the VAT system by limiting VAT exemptions to necessities such as raw agriculture food, education, and health. However, this does not mean that the benefits the poor rightly deserve will be removed. The administration commits to using the budget to provide targeted transfers and programs that are more transparent and accountable.”
4.) Adjusting oil and automobile excise taxes
“TRAIN increases the excise of petroleum product. This is a tax that will affect the rich far more than the poor, given their greater oil consumption than the poor. The administration is also doing this to address environmental and health concerns; taxing dirty fuel correctly also means investing in a more sustainable future for our country.
“Furthermore, it also simplifies the excise tax on automobiles, but lower-priced cars continue to be taxed at lower rates while more expensive cars are taxed at higher rates. This excise will raise revenue in a very progressive manner as the richer buyers tend to own more and expensive cars compared to those who earn less.”
5.) Introducing excise tax on Sugar-Sweetened Beverages (SSBs)
“Along with the Department of Health (DOH), DOF supports this as part of a comprehensive health measure aimed to curb the consumption of SSBs and address the worsening number of diabetes and obesity cases in the country, while raising revenue for complementary health programs that address these problems. This is a measure that is meant to encourage consumption of healthier products, to raise public awareness of the harms of SSBs, and to help incentivize the industry to develop healthier products and complements.”
Where will the tax reform fund go?
It will be able to fund investments in education to achieve a more conducive learning environment with the ideal teacher-to-student ratio and classroom-to-student ratio:
a.) Achieve the 100% enrollment and completion rates
b.) Build more classrooms
c.) Hire more teachers between 2017 and 2020
2. Healthcare Services
a.) It will help invest more in country’s healthcare through providing better services and facilities:
b.) Upgrade local hospitals and establish local hospitals
c.) Achieve 100% PhilHealth coverage at a higher quality of services
d.) Upgrade and/or relocate rural and urban health units to disaster-resilient facilities
d.) Build new barangay health stations
e.) Build new rural health units and urban health centers
f.) Hire additional doctors, nurses, dentists, pharmacists, medical technologists, public health associates, and UHC implementers
3. Infrastructure Programs
The additional revenue raised will be used to fund the infrastructure program of the Department of Public Works and Highways (DPWH), consisting of major highways, expressways, and flood control projects. Funding these major infrastructure projects is possible with tax reform for our country to sustain high and inclusive growth.
Source: Department of Finance