Republic of the Philippines

Western Mindanao State University

AFFIRMATIVE: TAX REFORM FOR ACCELERATION AND

INCLUSION (TRAIN) LAW IN THE PHILIPPINES

Ayub, Abdurabbhy J.

Francisco, Hendrix C.

Hetutua, Therese Janine D.

Jalnaiz, Je Anne R.

Larceña, Edessa P.

Group 7

September 2018
Abstract
 Introduction

Financial Crisis is something that cannot be solved by traditional mainstream solutions.

That is why for those minimum wage earners, starting in the first payday of 2018 was a great

sigh of relief. The reason for this is the income tax reduction in their pay slip, which gives the

credits to the newly implemented TRAIN law.

Tax Reform for Acceleration and Inclusion (TRAIN) Law, officially cited as the

Republic Act 10963, is the first of the five tax reform packages that enables Filipinos to attain a

simpler, fair and efficient tax system. (MoneyMax.Ph, 2018, Jan. 13). This was due to legislators

identified to be a block of congressmen whom challenge in the Supreme Court the legality of the

TRAIN Law, which was signed into law by President Rodrigo Duterte on the 19th of December

2017, which later took effect on January 1, 2018.

The said law vision allegedly creates a more effective and easier system where the

wealthier people, companies and etc. contribute more and the less wealthy will benefit from

services obtained through the government. (Al-Haliqiouis, C.F., 2018, Jan. 13). It is also one of

the primary ways in which the 2020 and 2040 vision of the Duterte administration is to be

achieved, that is why it had optimistic view about its effect on the economy, development and

poverty alleviation in its inception. (Wikipedia, 2018).

Essentially, TRAIN lowers personal income tax, simplifies the estate and donor's

tax and expands the value-added tax (VAT) range. On the other hand, it increases excise taxes on

fuel, mineral products, vehicles and cigarettes. It also imposes new taxes on sugar-sweetened

beverages and cosmetic procedures.

The TRAIN Law or Republic Act 10963 is helpful to the country’s people. It can help the

people in different ways and different aspects. Before the TRAIN Law was implemented, big

amount of taxes are being deducted from people’s hard-earned money. Every time they receive

their pay slips, it is an eyesore to see how their salaries get subtracted. But with the TRAIN Law,

people can get higher amount of take-home pays. Workers with ₱21,000.00 or less gross

monthly salary, or an annual income of ₱250,000.00 are exempted from income tax payments. A

lower income tax means that the workers can have more money to take to their families. This

also means that their money can be used to manage their finances better like investing their

money, buying a life insurance, and paying-off their credit card debt.

With the TRAIN Law, the country will have a fair tax system. According to the DOF, the

new law will lessen the tax burden of the poor and middle class because the tax burden will be

passed on to the higher-income earners who comprise 0.1% of the tax payers in the Philippines.

People who earn more than ₱8,000,000.00 annually will pay a higher maximum rate of 35%

which is only 32% before the law was implemented. Previously, economists criticized the 20-

year-old Philippine tax system under the National Internal Revenue Code of 1997 because it was

unfair to the Filipino middle class who are only middle-income earners. It is truly unfair for them

to pay a big amount of income but only earn a small amount of salary. It will be hard for them to

sustain the needs of their families.

There will also be a higher tax exemption cap for the 13 th Month pay of the workers.

From ₱82,000.00, the tax exemption ceiling for 13th month pay and other bonuses is now at
₱90,000.00 which means, people can have more money to spend and save during the Christmas

holidays. Christmas holidays are very important to all Filipinos, because of the TRAIN Law;

Filipinos can spend it better and nicer.

There will also be a simpler tax filling and payment. Computing the estate tax and

donor’s tax used to be very complicated with the different rates. In the old tax code, the estate tax

rates ranged from 5% to 32% and the donor’s tax rates ranged from 2% to 30% but with the new

tax reform law, the estate and donor’s tax will have a single fixed rate of 6%.

There are also higher VAT threshold and new exemptions. The TRAIN Law raises the

VAT threshold from ₱1,919,500.00 to ₱3,000,000.00. Goods and services sold by small and

micro businesses such as sari-sari store are exempted from VAT. This means no tax is passed on

to buyers, lowering the prices they have to pay when buying from these businesses.

The TRAIN Law also expands VAT exemption for certain people like Senior Citizens,

Persons with Disability (PWD), Raw food, agricultural products, tourism business, medicines for

diabetes, high cholesterol and hypertension, health and education, zero-rating to renewable

energy, homeowner fees, and BPO companies within special economic zone.

The implementation of the TRAIN Law is needed in addressing the progress President

Duterte is envisioning for the country. It is also a way for the country to have funds available to

build better roads and bridges, improve health and education and strengthen our safety and

security.
 Discussion 2

Increased prices of products and other services

Due to reduced taxes, the government needs to make up for loss of revenue. Because of

this, certain good will have higher taxes. Buyers and consumers should expect higher prices for

fuel and gas, electricity, vehicles, tobacco, and other products and services.

Though income taxes will greatly decrease for almost all employees, they would need to

spend more money on things that they might need.

Increase in DST and dollar deposit

Aside from increased prices of goods, Roque also said documentary stamp tax (DST),

which is a tax levied on special documents, papers, agreements, etc., increased 50 percent to 100

percent, except for property, savings and nonlife insurance.

More taxes for car owners

If you’re planning to buy a car, brace yourself for the doubled excise tax from 2% to 4%

for cars having a cost of ₱600,000 and below. If you’re eyeing on a car having a worth over ₱4

Million, then be prepared for a tax up to 50% of the vehicle’s value from its previous 10%.

Commuters can also experience adverse effects on transportation expenses due to a tax increase

on petroleum products up to ₱8 per liter. Diesel, LPG, and Kerosene are also subjected to

additional tax ranging from ₱1 to ₱3 per liter.

Wikipedia (2018). Tax Reform for Acceleration and Inclusion Act. Retrieved September 22,

2018, from https://en.wikipedia.org/wiki/-Tax_Reform_for_Acceleration_and_Inclusion

_Act

MoneyMax.Ph (2018, January 13). 5 Reasons Why the Tax Reform Law is Good for Us.

Retrieved September 22, 2018, from https://www.moneymax.ph/blog/-tax-reform-law

MoneyMax.Ph (2018). Pros and Cons of Train. Retrieved September 22, 2018, from

https://www.moneymax.ph/blog/-tax-reform-law

Al-Haliqious, C.F. (2018, Jan 13). Quora. Retrieved September 22, 2018, from

https://www.quora.com/what-is-train-law

Doquila, G.A (2018, July 24). Duterte: Train Law helps Filipinos. Retrieved September 22,

2018, from https://www.sunstar.com.ph/article/1754501

1. Train law – (Tax Reform for Acceleration and Inclusion) A law that reduces personal

income tax but imposes higher tax on fuel, cars, tobacco, and sugary beverages to

fund infrastructure and development projects of the government.

2. Financial crisis – A situation in which assets are overvalued, and it can be exacerbated

by irrational investor behavior. A rapid string of selloffs can further result in

lower asset prices or more savings withdrawals.

3. Wage – the money that is paid to the workers for their services.

4. Income tax – it is the workers paying from their earnings

5. Legislators – they are the politicians who pass the laws.

6. Allegedly – claimed to be something without a proof.

7. Optimistic – the outcome must be positive.

8. Poverty Alleviation – intending to lift people from poverty.

9. VAT – (Value Added Tax) tax based on the value of goods and services.

10. DOF – (Director of Finance) a person in charge of the financial affairs,

11. Eyesore – not good to be seen.

12. Annual income – the earnings of a person in a year.

13. Tax – mandatory financial charge by a government organization to fund public

expenditures

14. Estate tax – a tax based on the value of the net estate companies- decedent, whether

resident or nonresident of the Philippines,

who transfers or causes to transfer by gift or donation, whether direct or indirect,

in trust or otherwise, real, personal, tangible or intangible property.

16. BPO companies – contracting of non-primary business activities and functions to a third-

party threshold.

17. Special Economic Zone – a geographically bound zone where the economic laws

relating to export and import are more liberal as compared to other parts of the

country.

18. Envisioning – a future visualization of possibilities.