#c:finance

[the-denarius-blog]

How fair is TRAIN law?

By Zhaskia Mae de la Cruz

(Photo Credit)

2018 has started as a year full of changes. A change of year, a change of calendar, and, for the Philippines—a change of taxation system.  And while most of the people in the world probably welcomed the new year with a “bang,” not all Filipinos have embraced 2018 with open arms.

           The main reason behind this is that on January 1st of the new year, TRAIN law,—not a literal such as the MRT or the LRT, unfortunately; we’ll still see how these systems will change or improve—or the Taxation Reform for Acceleration and Inclusion program, has taken full effect and clearly not every “Juan” is happy about it.

           First things first, however. What is TRAIN Law, and why is it hailed to be beneficial for each and everyone? Moreover, if TRAIN law is intended to have good objectives, then why is it earning negative feedbacks?

           According to the Department of Finance (DOF), TRAIN is the first of a series of packages of the comprehensive tax reform program (CTRP) envisioned by President Rodrigo Duterte’s administration, which all in turn seek to correct deficiencies in the preexisting tax system to make it simpler, fairer, and more efficient.

           Prior to that, the previous taxation system has been deemed inequitable, or in simpler words, unjust.

           In relation to this, based on the previous tax system, an employee who is earning an annual salary over P10,000 but not over P30,000 has a tax rate of P500 + 10% of the excess over P10,000, wherein with the newly implemented TRAIN Law: workers, laborers, and employees who earn an annual salary of P250,000 and below are now exempted from paying personal income tax. Now, these people can enjoy an additional take-home pay of P1,541.83 to P2,683.84 from the year 2018 and beyond.

           Good news… right?

            Well here’s the thing. TRAIN Law isn’t only about 0% tax rate for P250,000 and below annual earners. Because associated with the Tax Reform for Acceleration and Inclusion program are the following: Sweetened Beverage Tax, Tobacco Excise Tax, Petroleum Excise Tax, Automobile Excise Tax, Cosmetic Tax, Estate Tax, Donor’s Tax, Coal Excise Tax, Mining Tax, and of course the updated Value Added Tax.

           Boy that’s a lot of taxes, isn’t it?

           To narrow things down, let’s take the Sweetened Beverage Tax as an example. Under TRAIN Law, all beverages that use caloric and non-caloric sweeteners will be taxed P6.00 per liter. These include cola drinks and other soft drinks, powdered drinks, and fruit juices. While on the other hand, drinks that use high fructose corn syrup (HFCS) will be taxed P12.00 per liter. But of course, there will always be an exception to the law—milk, 3-in-1 coffee, 100% natural fruit juice or vegetable juice, medically-indicated beverages, as well as drinks that use natural sweeteners such as coco sugar or stevia are all on the safe zone.

           Now Filipinos being an avid fan of cola drinks are clearly unhappy about this. As a matter of fact, in late 2017, there was an ongoing petition on Facebook prevent the Sweetened Beverage Tax as it will greatly affect small-time sari-sari store owners as well as simple sidewalk vendors in fear that the general folks will not choose to buy soft drinks anymore.

           In addition to this, there’s also the Tobacco Excise Tax, more famously known as Sin Tax, which is seen to somehow be the answer for people to quit smoking. Initially, during the first six months of 2018, excise taxes on tobacco products will increase to P32.50, then will eventually rise to P35.00 during the remaining six months until 2019. From 2020 to 2021, the tobacco tax will rise to P37.50. A fixed tax of P40.00 will be imposed on 2022 to 2023. From 2023 onwards, tobacco taxes will rise 4% annually.

           Liquefied Petroleum Gas or LPG is taxed P1.00 tax per liter in 2018, P 2.00 tax per liter in 2019, and P3.00 tax per liter in 2020. Diesel will be taxed P2.50 per liter in 2018, the P4.50 tax per liter in 2019, and P6.00 tax per liter in 2020. Gasoline, both regular and unleaded, will have a raised tax from P4.35 per liter to P7.00 in 2018, P9.00 per liter in 2019, and P10.00 tax per litter in 2020.

           While TRAIN law is clear on its goal to create a more just, simpler, and more effective system of tax collection, wherein the rich will have a bigger contribution and the poor will benefit more from the government’s program and services, many are still saying that TRAIN Law—despite its aforementioned established goals and objectives—appears to be “anti-poor.”

           Moreover, as employees who earn P250,000 and below annually are rejoicing their 0% tax rate, below minimum wage earners now bear the burden of the increase in excise tax as they will not benefit at all from the income tax exemption. While 7.5 million Filipinos are enjoying their extra take-home pays, there are remaining 15.2 million Filipinos who are struggling with the new tax system.

           As cliché as it may sound, change indeed is the only permanent thing in the world. And as 2018 is set to be a harbinger of lots of changes, it will only be really fair (just, simple, and effective) if every “Juan”—regardless if they’re rich or poor—is capable enough of facing them head-on.

[the-denarius-blog]

Following the TRAIN (Law)

By Arvin Tumaliuan

(Photo Credit: 1 2)

Finally, after over 20 years of waiting for a tax reform program, President Rodrigo Duterte has signed the Republic act No. 10963, or the Tax Reform for Acceleration and Inclusion (TRAIN) bill, into law, on December 19, 2017, the law which primarily aims to restructure the preexisting tax system into a “simple, just, and efficient” build.

           In spite of having faced heavy adversaries and suffering through countless debates and counter-arguments, the conditions of the newly-signed TRAIN Law has begun implementation since the first day of the year 2018, expected to accumulate a whopping P130 billion fund for various government agenda; infrastructure (primarily the government’s Build, Build, Build program), health, education, chiefly among others.

           Under this prime tax reform program of the Duterte administration, the take-home pay of the Filipinos will increase in amount due to a lower personal income tax.

           The bicam-approved TRAIN bill will give workers who earn P250,000 annually all in all exemption from paying tax, and those who earn higher than the aforementioned value will have to subject to the mandated income tax schedule penned into existence by the TRAIN Law.

           In essence, the tax reform has been designed to lessen the tax burden formerly imposed on the lower 99% of society—such standards stemming from the rate of income an individual earns annually—and is thus to be imposed upon the remaining 1% of society.

           Other means of generating revenue mandated by the TRAIN Law include higher excise levies on petroleum, automobiles, sweetened drinks (in layman’s term, softdrinks), surgical operations solely for aesthetic reasons, and coal.

            IBON foundation, a non-profit development organization, has pointed out that the law “only confirms the Duterte administration’s tendency towards anti-poor and pro-rich policies,” discussing at length in an article they had published that the poorer families will suffer from higher prices of commodities without getting an increase on the minimum wage.

           This, in turn, begs the question: Is TRAIN Law enough to eradicate all economic problems, or does it merely alleviate the problems for now, but will eventually blow up in the masses’ faces later on?

TRAIN’s first stop—the initial reactions 

As previously established, TRAIN Law has practically lifted the personal income tax; following this, it is then expected that the taxpayers will see an incremental increase on the price of fuel, electricity, sweet beverages, and cars, so that the loss revenue will be offset by the manufacturing taxes of these products.

           In connection to this, First Metro Investments Corporation Vice-President Cristina Ulang believes that it will be an additional burden for the consumers even if they receive higher take-home pays, for they will bear the brunt of resulting higher prices of basic goods and services.

           Despite these “sacrifices to make the system work,” as coined by Raymond Abrea, founder of Abrea Consulting Group, the long-term effect of the TRAIN Law is actually beneficial to Filipinos, as it will restrain inflation to the point that the transportation costs will decrease, and the production rate is projected to increase because of the infrastructure program.

TRAIN’s ‘station’ for the poor—what does it bring the lower class?

To protect the country’s poorest 10 million households from the infliction of higher costs of goods and services, Finance Secretary Carlos Dominguez III has assured that the Department of Social Welfare and Development (DSWD) will strengthen and prioritize the cash transfer projects.

           The DSWD is mandated to provide P2, 400 for each household in 2018, and is subject to increase come 2019 by P3, 600.

           "DSWD will identify beneficiaries based on the Pantawid Pamilyang Pilipino Program and the social pension beneficiaries. The budget for the unconditional cash transfer is included in the 2018 budget, totaling P25.7 billion," Dominguez has said in Malacanang briefing.

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