The Tax Reform for Acceleration and Inclusion or TRAIN bill approved by the House Committee on Ways and Means earlier this week is deemed as the means for the Duterte administration to fulfill its promise to break the inequality between the elite and marginalized Filipinos.
Originally crafted by Albay Rep. Joey S. Salceda, TRAIN is a comprehensive package of tax revisions and considered the most significant reform under the administration of President Rodrigo Duterte.
Salceda said the finally approved TRAIN substitute bill drafted by the committees technical working group is “relatively not far from the original Salceda/Department of Finance proposal, with the inclusion of sugar sweetened beverage tax.”
The House committee merged Salceda’s House Bill 4688 with another tax reform measure, HB 4774, authored by Quirino Rep. Dakila Carlo Cua, but retained most of the provisions as originally designed, including the unconditional cash transfers for three years.
TRAIN has earned the popular support of both government and business sectors, the civil society and non-government organizations, and ordinary Filipinos who stand to gain from its package of reforms.
The measure was approved with a 17-3 vote count, with three abstentions, and will be immediately submitted to the House plenary.
Salceda, senior vice chairman of the ways and means committee, said among the benefits the bill aims to deliver is the transfer of some P170 billion annually from the country’s rich to the middle class and low income households.
“It represents the single largest direct transfer of wealth in personal income taxes [PIT],” he added.
The Albay lawmaker. a noted economist, said the measure is expected to “ultimately reduce poverty to single digit, grow the economy by 9 percent, and transform the Philippines into an Asian economic powerhouse by 2028, with $1.2-trillion Gross Domestic Product.”
He noted the bill’s pro-poor feature has lent it unprecedented support from both the government and private sectors, civil society and non-government organizations making it a better understood and appreciated piece of legislation.
TRAIN carries a load of benefits for local governments. In three years, 40 percent of TRAIN revenues go to the Internal Revenue Allotments or IRA of barangays, towns, cities, provinces and the Autonomous Region in Muslim Mindanao.
Salceda stressed TRAIN is “the only tool that could make the tax system more efficient, equitable and pro-poor, as the government cannot exclusively tax the rich because such a measure would immediately be struck down as class legislation.”
Based on calculations, he said TRAIN will have a total monetary impact of P354 annually on the country’s poorest households. The consolidated measure aims to lower the PIT rates for 99 percent of the country’s taxpayers, while expanding the VAT base and adjusting rates for consumption taxes like those on petroleum products and automobiles.
Congress aims to pass the measure this year as the Tax Administrative Reform Act of 2017.
The bill would impose tax on diesel starting from P3, which would increase to P5 by January 2018 and to P6 by July 2019.
It would also increase the tax on lubricating oils and greases, waxes, regular gasoline, leaded gasoline, unleaded gasoline and aviation gas to a uniform P7 per liter, going up to P9 in 2018 and to P10 in 2019.
The present tax on these products ranges from P3.50 to P5.35. The tax on cars, including sport utility vehicles, worth up to P1.1 million would go up by 100 percent.
The approved TRAIN also incorporated the proposed tax on soft drinks and other sugar-sweetened beverages, while lowering the personal income tax (PIT).
Among others, those earning up to P250,000 a year would pay no tax. Those with income of between P250,000 and P400,000 would pay a tax of 25 percent of the amount in excess of P2,50,000.
Those with income of more than P400,000 up to P800,000 would have a tax of P30,000, plus 25 percent of the excess over P400,000.
Those earning from P800,000 to P2 million would pay P130,000 plus 30 percent of the excess over P800,000, while those with income of P2 million to P5 million would pay P490,000 plus 32 percent of the excess over P2 million.
Those earning over P5 million would pay P1.450 million plus 35 percent of the excess over P5 million. Under the present law, those earning over P500,000 after maximum deductions of P200,000 for a working couple pay an income tax of P125,000 plus 32 percent, which is the maximum rate, of the excess over P500,000.