The advocates and supporters of the Tax Reform for Acceleration and Inclusion (TRAIN), the first package of President Rodrigo Duterte’s administration’s Comprehensive Tax Reform Package, highlight the arguably most positive feature of the bill: the lowering of the personal income tax.
Sometimes, it is the only thing mentioned that it looked to encapsulate the whole TRAIN.
When TRAIN would be signed into law, people earning P250,000 below annually or around P21,000 below monthly would be exempt from personal income tax. There would be 7.5 million fixed income earners said to benefit from this provision, mostly from the middle class.
Decades of the personal tax income schedule not being updated has taxed people 32% for even those earning as low as P10,000 monthly, until a legislation from Bayan Muna that exempts minimum wage earners from personal income tax was passed into law.
Even then, professionals feel the brunt of the tax that takes away a third of their earnings.
The TRAIN looked as the answer to this long-standing woe.
The government, through the Department of Finance (DOF), said it would lose P 130 billion revenues from the lower personal income tax.
However, they also said they would earn as much as P 300 billion through other new taxes and tax rate increases in the TRAIN. This amount would not only recoup what the government would lose in lowering personal income tax, but earn the government twice as much.
Where would the earnings come from?
Makabayan legislators from Anakpawis and ACT Teachers Partylist said these would come from the taxes on goods and services or consumption taxes that directly affect more Filipinos in their daily lives, as well as the excise taxes on petroleum products that jack up prices of basic commodities, electricity, and public transport fares among others.
More of these new earnings would come from the majority of Filipinos, most of them poor. This is what makes the TRAIN anti-poor, said Makabayan legislators.
“Duterte is pushing his ‘matapobre’ [disdainful of the poor] act, by burdening the poor with increased taxes on consumer goods such as LPG, electricity, sweetened beverages, transportation and others, also imposing VAT on previously exempted such as shipping, energy and coal, this will definitely realize his quote ‘mamatay kayo sa gutom [why don’t you die of hunger],’” Anakpawis Representative Ariel Casilao said in a statement.
In the end, more would be squeezed out from more people, especially the poor.
Liquefied petroleum gas, used for cooking by many households, was levied an excise tax for the first time. With the passing of TRAIN, it would now be taxed P6 that would be divided in three years—P1 in 2018, P2 in 2019 and P3 in 2020. This would mean P11 increase in a standard 11-kg LPG tank due to the new tax, apart from numerous oil price increases.
Diesel fuel would also be taxed for the first time. It would be levied an excise tax of P13, divided in three years—P2.50 in 2018, P4.50 in 2019, and P6 in 2020. Tax on regular and unleaded premium gasoline would be raised to P26, divided in three years—P7 in 2018, P9 in 2019 and P10 in 2020, from the current P4.35.
Tax on petroleum products usually cause a domino effect on prices of basic commodities, public transport fares, services, and electricity rates among others. The DOF says the inflation caused by new or higher indirect taxes would not be so high as to cause price increases, but that remains to be seen. In the bill, however, was the idea that prices of goods would definitely rise that the government would ready an ‘unconditional cash transfer’ of P300 monthly to those gravely affected.
Another controversial provision of the TRAIN that would hit mostly the consumption of poorer households is the tax on sugar-sweetened beverages. Congress approved a P6-tax per liter for beverages using caloric and non-caloric sweeteners and P12 per liter for beverages using high fructose corn syrup. While milk, brewed coffee, 100% fruit and 100% vegetable juices were exempt from the tax, these are not the products usually consumed by the poor. But soft drinks, powdered juices, instant coffee mixed with sugar and other beverages, that the DOF is discouraging the poor from consuming that is why they call this a ‘health tax’, while unhealthy are the ones that the poor could afford.
Many items with value-added tax (VAT) exemptions were also removed, as per the context of the original proposal from the DOF to do away with so many exemptions. Of around 90 items (products and services) exempted from VAT, only a few items were specified to have retained their exemptions. Among these retained VAT exemptions included those for senior citizens and persons with disabilities, raw food and agricultural products, business process outsourcing (BPO) firms, cooperatives and prescription drugs and medicines.
ACT Teachers Partylist Rep. Antonio Tinio said that the bill Congress ratified should specify all laws that would be repealed given the change in VAT exemptions, however this procedure was not followed. This opens to uncertainty items that have VAT exemptions in other laws, but were not specified in the TRAIN to have retained their exemption, such as the exemption for state universities and colleges and socialized housing among others.
Non-gainers
Independent thinktank IBON Foundation said that even with the reported 7.5 million personal income taxpayers that would be relieved, 15.2 million families would be left without any tax income gains.
“The overwhelming majority of Filipinos do not get any income tax benefits from TRAIN. Most of the countries 22.7 million families that do not pay income taxes because they are just minimum wage earners or otherwise in informal work with low and erratic incomes,” explained IBON Foundation.
The 15.2 million families that would not gain anything from the tax reform “would deal with more expensive food and drinks, cooking expenses, jeepney and bus fares, electricity and other goods and services next year.”
IBON Foundation also noted that the data of 7.5 million who would no longer pay taxes that the government kept on mentioning appeared to have included minimum wage earners who have long been exempted from paying personal income tax because of another law.
IBON Foundation added that the burden on the poor can only get worse once it becomes clear what VAT exemptions will be removed.
