Chapter 1

THE PROBLEM AND ITS SCOPE

Introduction

The Tax Reform for Acceleration and Inclusion (TRAIN) Act, officially cited
as Republic Act No. 10963, is the initial package of the Comprehensive Tax Reform Program
(CTRP) signed into law by President Rodrigo Duterte on December 19, 2017.[1] TRAIN consists
of revisions to the National Internal Revenue Code of 1997, or the Tax Code.[2] This reform
includes packages that make changes in taxation concerning the personal income
tax (PIT),[3]estate tax, donor's tax, value added tax (VAT), documentary stamp tax (DST) and the
excise tax of petroleum products, automobiles, sweetened beverages, cosmetic procedures, coal,
mining and tobacco.[4]

The prominent feature of the tax reform is that people who earn ₱250,000 annually or
₱21,000 monthly and below are exempted from paying personal income tax (PIT). This
includes minimum wageearners, who were also exempted in the former tax system. On the other
hand, those earning over ₱250,000 have tax rates following a set PIT schedule. Essentially,
greater income is taxed at higher tax rates.[5] This denotes that low to middle income-earners get
to have a higher take home pay, while high income-earners have a bigger contribution to tax
revenues. Increase in consumption taxes intend to counterbalance PIT tax exemptions.[3]
The TRAIN LAW is one of the primary ways in which the 2020 and 2040 vision of
the Duterte administration is to be achieved,[3] and so, it had optimistic projections about its
effect on the economy, development and poverty alleviation in its inception. Regardless,
contentions about the passing of this law has been present since the beginning and the
subsequent reception by the people since its ratification has been controversial. In the first
quarter of 2018, both positive and negative outcomes have been observed. The economy saw an
increase in tax revenues, government expenditure and an incremental growth in GDP.[6] On the
other hand, unprecedented inflation rates that exceeded projected calculations,[7] has been the
cause for much uproar and objections. There have been petitions to suspend and amend the law,
so as to safeguard particular sectors from soaring prices.
The TRAIN Act aims to address the reputed weaknesses of the Tax Code, specifically through
the following objectives:[3]

 First, it intends to simplify the previous system to make it more straightforward and intuitive.
 Second, it intends to create a more "just" taxation scheme, wherein taxation is staggered and
distributed on the basis of financial capability and the underprivileged are able to reap more
advantages.
 Third, it intends to improve the efficiency by which tax is collected, particularly tackling
issues of compliance.
 Fourth, it increases the tax burden felt by the general population thus increasing the overall
inflation rate.
The changes instituted by the tax reform is expected to be able to increase revenue to finance the
infrastructure, healthcare and education programs of the Duterte administration.[11][1] The notion
that the poor will be taxed less than the wealthy population is actually a propaganda widely
spread by the government, the additional taxes imposed by the government will just be passed
down through the lower and middle income class thus increasing the inflation.
In the long term, TRAIN Act is just the first from a series of tax reforms, as part of the CTSP,
which will be one of the principal means by which the 2020 and 2040 vision of the incumbent
administration is to be achieved. The vision in 2020 is that poverty will be reduced from 21.6%
to 14%, while 2040 sees the Philippines as having “eradicated extreme poverty”, established
“inclusive economic and political institutions where everyone has equal opportunities” and
achieved “high-income country status”.[3] This can be achieved if economic growth can be
sustained by at least 7% each year and if the source of growth can be shifted to investment from
consumption. This means prioritizing investments on people through "health, education, life-long
training, social protection, infrastructure, and research and development" and investments on
infrastructure to boost productivity
House Bill No. 4774 is credited as the original measure that led to the TRAIN Act. It was
endorsed by theDepartment of Finance (DOF) to the Philippine House of Representatives on
September 26, 2016 as the first package of a wider CTRP.[13] It was filed before the legislature
on January 17, 2017 by Congressman Dakila Cua[14] of Quirino. Cua is also the chairperson of
the Ways and Means Committee of the Congress which deals on taxation.[13]
After thirteen hearings which was done within the span of four months, the House Bill No. 7890
was consolidated with 54 other tax-related bills to come up with a House Bill 5636, a substitute
bill which had "moderate" changes from House Bill 4774. The substitute measure was approved
on May 8.[13]
The DOF requested President Rodrigo Duterte to declare the bill as "urgent" on May 29, 2017.
Bills passed on the second reading by the Congress but are not certified "urgent" by the president
could only be voted upon after copies of the given measure is provided to House of
Representatives members three days before the day of the third and final reading.[13] On May 31,
2017 just before the 17th Congress adjourn its first regular session, the bill passed the final
reading with 246 voting for and 9 against the bill. Only one made an abstention. Most of those
who opposed were from the Makabayan bloc.
A version of the bill was filed in the Senate in March 2017 by Senate President Aquilino
Pimentel III. By May 2017 six public hearings were conducted by the senate. The Senate had to
wait for the House of Representatives version to get pass before it could start plenary discussions
like other bills on budget or tax and appropriations. The Senate voted 17-1 to approve the Tax
Reform Acceleration and Inclusion (TRAIN) bill, with Sen. Risa Hontiveros being the lone
dissenter on Nov 28, 2017. On the succeeding voting for the TRAIN, the positive votes were cast
by Senators Sonny Angara, Nancy Binay, Frank Drilon, JV Ejercito, Chiz Escudero, Win
Gatchalian, Dick Gordon, Gringo Honasan, Loren Legarda, Joel Villanueva, Koko Pimentel,
Grace Poe, Ralph Recto, Tito Sotto, Cynthia Villar and Migs Zubiri. The negative votes were
cast by Senators Ping Lacson, Risa Hontiveros, Bam Aquino and Antonio Trillanes IV[13]
Duterte's certification of the TRAIN as "urgent" allowed the bill to get passed the second
reading[16] on November 28, 2017.[17] Within the same day, the Senate bill passed the third and
final reading with 17 senators voting for the bill.[18] Only Risa Hontiveros voted against the bill.
The Bicameral Conference Committee consolidated the bills passed by the House of
Representatives and the Senate. The committee then approved a bill which favored the Senate
version on December 11, 2017 and prepared a report after for ratification of both chambers of the
Congress and signing of the President.[19]
the House of Representatives and the Senate ratified the version of the bill prepared by the
Bicameral Conference Committee on December 13, 2017.
President Duterte exercised his veto power to void 5 provisions of the law. The provisions vetoed
were the following:

1. Reduced income tax rate of employees of Regional Headquarters (RHQs), Regional

Operating Headquarters (ROHQs), Offshore Banking Units (OBUs), and Petroleum
Service Contractors and Subcontractors;
2. Zero-rating of sales of goods and services to separate customs territory and tourism
enterprise zones;
3. Exemption from percentage tax of gross sales/receipts not exceeding five hundred
thousand pesos (P500,000.00);
4. Exemption of various petroleum products from excise tax when used as input, feedstock,
or as raw material in the manufacturing of petrochemical products, or in the refining of
petroleum products, or as replacement fuel for natural gas fired combined cycle power
plants; and
5. Earmarking of incremental tobacco taxes.
6. These were the revisions made to the Tax Code:[21]

5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99,
Amended 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149,
Sections 151, 155, 171, 174, 175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190,
191, 192, 193, 194, 195, 196, 197, 232, 236, 237, 249, 254, 264, 269, and 288

Created
51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, and 265-A
Sections

Repealed
35, 62, and 89
Sections

There are four (4) complementary measures undertaken to ensure the income from the TRAIN
Law will be properly allocated for the development of the Philippines as a nation. These are
the Tax Administration, Ear Making,Infrastructure Projects, and Social Programs. Steps to
modernize and refine the tax administration processes are undertaken to support the changes in
tax policy so as to improve security against tax crimes and to ensure taxpayer compliance. On
top of improving electronic systems (e.g. eBIR forms, Electronic Filing and Payment System,
mobile payments) the following reforms are implemented:[22]
 Mandatory fuel marking
 Provision for use of electronic receipts
 Connection of cash registers and point of sale machines to BIR servers for real time
reporting of sales and purchase data
 Relaxation of bank secrecy laws and automatic exchange of information to allow for more
effective prosecution of criminal cases
For 5 years from the law's enactment, all revenues will be set aside for infrastructure and social
programsonly, with a 70% and 30% portion respectively. Infrastructure projects that will
receive priority funding include the Build, Build, Build Program that tackles the problem of
congestion through the construction of public transport systems and road networks and the
refurbishing and enhancing of military facilities. Additionally, part of the 70% will be allocated
to the building of sports facilities in public schools as well as amenities that will allow access to
potable water in public spaces. The social programs that will receive priority funding from 30%
of revenues include:[22]

 Programs for sugar farmers to increase productivity, provide livelihood opportunities,

develop alternative farming systems, and enhance farmer's income
 Social mitigating measures and investments in education, health, social protection,
employment, and housing for poor and near-poor households
 Unconditional cash transfer to the poorest 10 million households
 Social benefits card to determine qualified beneficiaries (fuel vouchers for PUJs, fare
discount for all public utility vehicles, discounted purchase of NFA rice, free skills training
under TESDA)
inorder to provide provisional protection for vulnerable households from the initial shock of the
TRAIN Law, unconditional cash transfers are dispensed. On the first year, beneficiaries receive
Php200 per month. In the succeeding 2 years, they receive P300 per month. The UCT is obtained
from oil excise tax revenues. In addition to the UCT, social welfare cards are provided to aid in
continuous conferring of benefits and subsidies to the poorest households. This includes
subsidies for "medicine, transportation, rice, and vocational trainings".
Theoretical/Conceptual Framework

This study anchored on the Aleli Carissa D. Gimena “Revisiting the TRAIN law” which states
that

Nothing is forever, except change. The wise words of Buddha proclaim the undeniable truth that
the only thing constant is change. Life is a process of becoming; thus, we should always keep
ourselves abreast with the changing times. After all, progress is impossible without changing the
status quo.

For most of us, the beginning of the New Year is a time to restart, reboot, and reassess our
personal goals. As the first month of 2019 unfolds, it is high time to revisit the resolutions we’ve
set — how far we’ve come and our rooms for growth. For the government, now is the time to
reevaluate existing policies or reform laws to meet new exigencies. As taxpayers, it is important
to know the recent developments in order to thrive and survive amidst the demands of our
dynamic everyday life.

A little more than a year ago — on Jan. 1, 2018 to be exact — the Tax Reform for Acceleration
and Inclusion (TRAIN) Act took effect. Being the first package of the Comprehensive Tax
Reform Program (CTRP), TRAIN 1 introduced a lot of significant changes. Among its purposes
was to raise revenue for the government’s social services and infrastructure programs. TRAIN 1
reduced personal income taxes after 20 long years of non-adjustment of tax rates; but it imposed
higher excise taxes on automobiles, petroleum products, tobacco, sugar-sweetened beverages and
other non-essential goods. The legislators intended that with the people’s support, all these
reforms will ultimately result in lower prices, more job opportunities and a brighter future for
each and every Filipino.

Literally and figuratively, the TRAIN came to pass accompanied with much noise. Heated
discussions ensued in both chambers of Congress. Some advocates say it arrived as a Godsend
and was timed perfectly. Others claimed it was hurriedly enacted, without the ordinary taxpayer
being duly informed of its many implications. Being the most recent and comprehensive
economic legislation by far, the public sought to better understand the law and its impacts – on
take-home pay, prices of goods and services, and consumer spending patterns. As a response,
several developmental and business organizations — including professional services firms such
as P&A Grant Thornton — organized seminars on the law and the latest implementing
regulations from the Bureau of Internal Revenue, to educate Filipinos on the relevant
amendments.

Before the implementation of the TRAIN Law, its detractors theorized that the increase in
petroleum prices would cause a domino effect and, ultimately, lead to an increase in the prices of
goods and services, falling on the shoulders of consumers, especially the poor. Lo and behold,
the rise in prices of everyday commodities was very much felt since the beginning of 2018.
Burdened by the price shock, there was an uproar from citizens seeking the suspension of the
law. While it is true that the TRAIN Law was not all to blame, we cannot discount the inability
of ordinary people to afford rice, not to mention softdrinks, alcohol, and cigarettes, and the fuel
necessary for daily transportation. For someone who drives almost daily, I could very well
imagine how taxi drivers might be dealing with gasoline prices that spiked to a record-breaking
P60.87 in October. Mothers and homemakers found themselves on the front lines as their
household budgets bought fewer and fewer groceries. Restaurants started skimping on portion
sizes or simply charged more.

Although the individual income tax brackets have finally been adjusted and augmented by the
TRAIN Law, they were accompanied by a whopping surge in inflation. In October, inflation hit
6.7%, moving even further away from the Bangko Sentral ng Pilipinas’ target range of 2-4% for
2018. Although the causes include world oil prices or other forces, it is clear that the rise in
inflation was partly caused by TRAIN. Adding fuel to the fire, whereas the higher excise taxes
target the rich, the increase in prices hurt the poor the most. Hence, the wide gap between the
rich and the poor remains.

The question now is: Did TRAIN 1 attain its objectives? Or more specifically for the individual:
Was the increase in net income due to the decrease in income tax rates enough to counter the
higher inflation rate and increase in prices? The answer lies in whether or not there has indeed
been an improvement in the effective purchasing power of Filipinos. Purchasing power is an
important indicator of the economic condition of the nation. All else being equal, inflation
decreases the amount of goods or services one is able to purchase; and reduced purchasing power
leads to a decrease in living standards. It is hoped that the tax reforms will produce more benefit
than harm, and that such advantages will trickle down to ordinary people sooner. Periodically
reviewing the effects of the law is key, along with efficient execution, to ensure that tax
collection is indeed put to good use.

Notwithstanding its drawbacks and the appearance to most consumers that the promise of the
TRAIN law holds no water, Budget Secretary Benjamin E. Diokno denied a report that the
government has failed to reach its target revenue collection for 2018. He ruled out halting the
implementation of the TRAIN law, saying that measures are in place to temper the harmful
impact of higher prices. Suspension then is out of the question. For most of 2018, Mr. Diokno
and President Rodrigo R. Duterte rejected calls to review the controversial tax reform law,
saying it is needed for economic growth. Then, there was a change of heart sometime in October.
The government announced, albeit with initial reluctance, that the P2-increase in fuel excise tax
scheduled in January 2019 will be suspended. At that point, world oil prices noticeably dropped,
as global supply outstripped demand. The suspension of the TRAIN Law was lifted.

Now, we welcome the New Year with the second tranche of the TRAIN Law. On Thursday, Jan.
10, the Department of Energy (DoE) announced that 444 retail stations nationwide are now
imposing the second wave of excise taxes on petroleum products, as mandated by the TRAIN
Law. The DoE expects other gas stations to follow suit in February.

On a more positive note, the Philippine Statistics Authority reported that headline inflation
decelerated to 5.1% in December. The peso, which had been weakening against the dollar last
year, slightly recovered on the first and second weeks of January. Gasoline prices receded to
P45.50 per liter. The performance of the Philippine Stock Exchange improved and reflected
growing business and investor confidence.

Let us then choose to be grateful for these recent, positive developments and have faith that the
government will remain vigilant in closely monitoring the imposition of taxes vis-à-vis the prices
of basic goods and commodities. Let us hope that the President and his economic advisers will
act more responsively to address the concerns of the ordinary taxpayer in light of the ever-
changing times, especially punctuated by volatile crude oil prices.

It is essential to always know the changes in our tax laws, and the corresponding consequences,
not only to ensure compliance and avoid risks, but also to assert our constitutional rights as
citizens. And together, let us pray that the tax reforms this year, moving forward, would lead us
to a more equitable and fast-growing Philippine economy conducive to a life worth living.

SCHEMA OF THE STUDY

DEPENDENT VARIABLE INDEPENDENT VARIABLE

TRAIN LAW
BARANGAY TREASURER
 INCOME TAX
 SIMPLIFIED  COLLECTING AND
ESTATE AND ISSUING OFFICIAL
DONOR’S TAX RECEIPTS FOR TAXES
 SIMPLIFIED OR PAYMENTS
VALUE ADDED ACCRUING TO THE
TAX BARANGAY TREASURY
 EXCISE TAX OF  DISBURSING OF FUNDS
PETROLEUM IN ACCORDANCE WITH
PRODUCTS THE PROCEDURES
 EXCISE TAX OF PRESCRIBED BY LAW
AUTOMOBILES  PROVIDING AN
INCREASE INVENTORY OF ALL
 EXCISE TAX ON BARANGAY ASSETS
SWEETENED UNDER HIS/HER
BEVERAGES CUSTODY
 COAL EXCISE TAX
 COSMETICS TAX
 TOBACCO TAX
STATEMENT OF THE PROBLEM

This study aimed to evaluate the relationship between the knowledge and awareness
of the Barangay Treasurers and the implementation of the TRAIN law in selected Barangays of
Dapitan City, Zamboanga del Norte.

Specifically, it sought to answer the following questions:

1. What is the profile of the respondents in terms of:

1.1.Age;
1.2.Sex;
1.3.Religion;
1.4.Civil status; and
1.5.Educational attainment?
2. What is the implementation of the TRAIN law brought in the respondents in terms of:
2.1.Income tax;
2.2.Simplified estate and Donor’s tax;
2.3.Simplified Value added tax;
2.4.Excise tax of petroleum products;
2.5.Excise tax of automobiles increase;
2.6.Excise tax on sweetened beverages;
2.7.Coal excise tax;
2.8.Cosmetics tax; and
2.9.Tobacco tax?
3. What is the level of Barangay Treasurer’s knowledge and awareness of the TRAIN law in
terms of:
3.1.collecting and issuing official receipts for taxes or payments accruing to
the barangay treasury;
3.2.disbursing of funds in accordance with the procedures prescribed by law; and
3.3. providing an inventory of all barangay assets under his/her custody?
4. Is there a significant difference in the knowledge and awareness of the barangay treasurers in
the implementation of the TRAIN law when data are classified according to age, sex,
religion, civil status, and educational attainment?
5. Is there a significant difference in the barangay treasurers’ knowledge and awareness when
data are classified according to age, sex, religion, civil status, and educational attainment?
6. Is there a significant relationship between the implementation of the TRAIN law and the
knowledge and awareness of the barangay treasurers’?

DEFINITION OF TERMS
 CHAPTER 2
REVIEW OF RELATED LITERATURE AND STUDIES
 Literature

Knowing the law is not the same as knowing how it will be implemented. New laws require
rules and regulations on how these changes will be applied. These implementing rules and
regulations are issued soon after the law is enacted.
In the case of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the issuance was
spread out through the year. In fact, the first of these regulations was released before 2018.
Revenue Memorandum Circular (RMC) No. 105-2017 was issued on Dec. 29, 2017.
It prescribed the revised table for the withholding tax on compensation income.
Since then, the Bureau of Internal Revenue (BIR) has released various regulations, circulars and
orders to implement the first package of the government’s Comprehensive Tax Reform Program.
The first, and perhaps the most important part of the tax reform, is the lowering of the personal
income tax. Subsequent regulations also clarified certain portions of the personal income tax,
specifically the optional 8 percent rate.
Under TRAIN Law, self-employed and professionals were allowed to avail themselves of the
optional 8 percent tax in lieu of the graduated personal income tax and percentage tax. The
TRAIN Law also stated that it will be available to those whose gross sales do not exceed the
VAT threshold.
Revenue Regulations (RR) No. 8-2018 clarified that VAT-registered taxpayers would not be able
to avail themselves of the 8 percent rate, regardless of their gross sales. The regulation also
clarified that electing the 8 percent rate should be irrevocable for the duration of the year.
It further stated that availing of the 8 percent had to be made in the First Quarter Percentage
and/or Income Tax Return. Otherwise, the taxpayer would be deemed automatically subject to
the graduated income tax rates.
Not all the issued regulations simply restate or clarify TRAIN. For instance, under the TRAIN
Law, the rates on creditable withholding tax (CWT) shall be anywhere between 1 and 15 percent.
The imposition of the specific rates is regarded as the privilege of the Secretary of Finance (upon
recommendation of the BIR Commissioner).
RR 11-2018 imposed the rates for the CWT. The rate for professional fees could either be 5
percent or 10 percent for individual payees, or 10 percent or 15 percent for non-individual
payees. It also clarified the new rates for various other types of income payments.
In fact, the first three revenue regulations released in 2018 provided the revised rates for
excise taxes.
RR 1-2018 was issued for mineral products, 2-2018 for petroleum products, and 3-2018
for tobacco products.
However, these issuances merely restated the new rates imposed by TRAIN, amending previous
BIR issuances that covered the matter.
Later in the year, the BIR issued RR 5-2018 for automobiles and 20-2018 for sweetened
beverages. These later issuances provided more details, explaining the new procedures and new
forms to be used.
These amended tax rates (not just limited to excise taxes) required new alphanumeric tax codes
as well. Revenue Memorandum Orders (RMO) were released throughout the year to cover the
new rates for sweetened beverages (RMO 1-2018), personal income tax (RMO 28-2018),
petroleum products (RMO 31-2018) and many others.
The implementation of these new rates will also take time. As such, the BIR released transitory
procedures under RMC 2-2018, 3-2018, and 4-2018. These RMCs covered income taxes,
documentary stamp tax, and excise taxes, respectively.
Another aspect of the first package is raising the VAT threshold to P3 million in annual gross
sales. What TRAIN does not state is how taxpayers will actually be affected. For example,
taxpayers earning P2.5 million annually will have been registered as VAT taxpayers, but were
now below the threshold.
How will they transition from VAT to Non-VAT? What will happen to their receipts?
RR 13-2018 implemented the new provisions on VAT and provided its transitory provisions.
According to the regulation, VAT-registered taxpayers that wanted to register as Non-VAT
needed to update their registration and surrender their unused invoices.
They will still be able to use their invoices as long as they indicate that they will no
longer be valid for claiming input taxes.
Taxpayers who wanted to continue as VAT taxpayers will be unable to cancel their VAT
registration for a period of three years.
RR 15-2018 and, later, 19-2018 imposed the deadline for VAT taxpayers to update their
registration to Non-VAT.
Other lesser-known provisions of the TRAIN Law also needed regulations to support them.
Among these are estate and donor’s taxes, the deductibility of expenses, the stock transfer tax
and the interest penalty.
RR 12-2018 prescribed the implementation of the donor’s tax and the estate taxes. Notably, the
regulation allowed the withdrawal from the decedent’s bank account, subject to a final
withholding tax.
RR 6-2018 applied the changes to the deductibility of expenses under TRAIN. The changes to
the stock transfer tax were covered by RR 9-2018.
Another notable change implemented by TRAIN is the lowering of the interest penalty. Before
TRAIN, the interest penalty is equivalent to 20 percent. Under TRAIN, this was changed to
twice the legal interest set by the BSP. Since the current legal interest is 6 percent, this
effectively lowered the rate to 12 percent.
RR 21-2018 clarified that the new interest rate would apply only to those deficiency assessments
issued after the TRAIN Law passed. As such, deficiency taxes until the end of 2017 would still
be subject to the 20 percent penalty.
These changes are hard to catch if taxpayers do not pay close attention. For example, there were
only 25 days to update the registration from VAT to Non-VAT initially. RR 15-2018 was
published on April 5, 2018, yet set the deadline to April 30, 2018.
This was later amended by RR 19-2018 to Aug. 31, 2018. Even so, it was published on Aug. 9,
2018, giving taxpayers only 22 days notice.
Taxpayers who did not pay close attention would have been locked as VAT taxpayers for
three years had they missed those deadlines.
At best, these lesser known issuances could cause unwarranted hassle. At worst, it could cause
failed compliance and, in turn, hefty penalties. Lack of tax education causes unnecessary
expenses and penalties.
To avoid this, taxpayers must remain vigilant and continue to educate themselves. The
overarching goal of the first package of the TRAIN is to "create a simpler, fair, and more
efficient system".[5]Through this program, the richer tax payers of the Philippines will pay a
greater contribution to enable the government to execute its programs and services targeted to the
general improvement of the country, especially the less fortunate.[5][23] There are six (6) main key
provisions, three (3) additional excise taxes, and four (4) financial taxes.[24]
Income Tax
"The TRAIN lowers the Personal Income Tax (PIT)for all taxpayers except the
rich".[5] Effectively, personal taxes will be reduced for 99% of the Philippine tax payers.
The new PIT is summarized in the table below

Percent of
Annuable Income Tax Tax Rate
Taxpayers

₱0-250,000 0% 83%

Over ₱250,000-400,000 20% of the excess over ₱250,000 8%

Over ₱400,000-800,000 ₱30,000 + 25% of the excess over ₱400,000 6%

Over ₱800,000-2,000,000 ₱130,000 + 30% of the excess over ₱800,000 2%

Over ₱2,000,000- ₱490,000 + 32% of the excess over

1%
8,000,000 ₱2,000,000

₱2,410,000 + 35% of the excess over

Over ₱8,000,000 0.1%
₱8,000,000

Additionally, minimum-wage earners are still exempted from PIT. The Law also ensures a
minimum wage earner who incurs a small raise will not have his overall salary (with the PIT
deducted) less than minimum wage. Also, married couples where both parties are working may
be exempted up to a total of ₱500,000. This does not include the exemption from the first
₱90,000 of their thirteenth month pay and additional bonuses. Finally, Self-employed and
professionals with gross sales below VAT can only pay 8% flat tax instead of their income and
personal tax.[5]
Simplified Estate and Donor's Tax
The TRAIN aims to simplify property purchases, transfers and donations in order to make the
land market more efficient thus ensuring the usage of properties is maximized.
The estate tax is now reduced to 6% based on the net value of the property. It also has a standard
deduction of ₱5 million as well as a ₱10 million exemption on the family home.
The donor tax is also reduced to 6% of the net donations for gifts above ₱250,000 yearly.[25]
Simplified Value Added Tax
The government's aim to elevate the less fortunate in the Philippines and drive development is
exemplified as the TRAIN repeals 54 out of 61 of the non-essential VAT exemption. In order to
protect these less fortunate persons, as well as small and micro businesses, they are exempted
from VAT on goods and services of marginal establishments. VAT exempt tax payers now have
the option to:

 PIT schedule with 40% OSD on gross receipts or gross sales plus 3% percentage tax
 PIT schedule with itemized deductions plus 3% percentage tax, or
 Flat tax of 8% on gross sales or gross revenues in lieu of percentage tax and personal income
tax.[23]
"TRAIN aims to clean up the VAT system to make it fairer and simpler and lower the cost of
compliance for both the taxpayers and tax administrators".[23] As such, VAT exemptions are now
only limited to health, education and raw agriculture food. In 2019, medicines for hypertension,
high cholesterol and diabetes will be exempted from VAT. Similarly, purchases from senior
citizens and persons with disabilities. Housing that costs less than ₱2 million shall also be
exempted starting in 2021.
Excise Tax of petroleum products
This tax aims to increase efforts towards decreasing the consumption of harmful fuel, and
veering towards a healthier, more sustainable future. The price of fuel also varies due to the
global inflation of oil.[26] Listed below is the effect of the Petroleum Excise Tax (note: the
additional excise tax is per liter)[27]

Excise Tax per Liter Current 2018 2019 2020

LPG ₱0 ₱1.00 ₱2.00 ₱3.00

Diesel ₱0 ₱2.50 ₱4.50 ₱6.00

Regular and unleaded premium gasoline ₱4.35 ₱7.00 ₱9.00 ₱10.00

Listed below are the new excise taxes for specific fuel products for the year 2018

Petroleum Product Excise Tax per Liter

LPG ₱1.00
Bunker Fuels ₱2.50

Diesel ₱2.50

Petcoke ₱2.50

Kerosene ₱3.00

Aviation gas ₱4.00

Gasoline ₱7.00

Naphtha ₱7.00

Asphalt ₱8.00

Asphalt ₱8.00

Lubricating oil ₱8.00

Paraffin wax ₱8.00

Refined fuels ₱8.00

Excise Tax of Automobiles increase

The table below summarizes the excise taxes on automobiles. The second column illustrates the
tax rate on vehicles based on their specific price range. The third column portrays the actual
average effective tax rate. Because the TRAIN law increases the PIT of 99% of the population,
their increase in net income will still be more than enough to compensate for the effects of the
excise tax on automobiles. This means they still benefit from the TRAIN as they incur additional
disposable income in the end. In addition, because richer tax payers tend to purchase more cars,
the additional revenue from this tax will mostly come from them.[28]
 Automobile prices Tax Rate Average effective tax rate

₱600,000 and below 4% 3%

₱600,000 to ₱1,000,000 10% 8%

₱1,000,000 to ₱4,000,000 20% 15%

₱4,000,000 and above 50% 30%

Excise Tax on Sweetened Beverages

"The SSB (Sugar-Sweetened Beverages) tax will promote a healthier Philippines".[29] It achieves
this by reducing the increasing number of diabetes and obesity cases, through raising awareness,
promoting the consumption of healthier products and encourage companies to innovate healthier
alternatives.[29]
TRAIN imposes new taxes of ₱6 per liter on drinks containing sweeteners and ₱12 per liter on
drinks containing high-fructose corn syrup. Milk, 100% natural juice and 3-in-1 instant coffee
drinks are exempt from the excise tax.[29]
Coal Excise Tax
Coal is a cheap source for power generation and has its uses in multiple industries such as
the chemical andpharmaceutical industries. It is also a prime ingredient for activated
carbon, carbon fibre and silicon metal.[30]However, it remains a major source for air pollution in
the Philippines. The aim of the excise tax is to shift towards renewable energies and generate
additional income for building infrastructures and social services. The excise tax on coal will
increase from its original ₱10/Metric Ton(MT) to ₱50/MT on both domestic and imported coal.
₱50/MT will be added each succeeding year until January when the rate would have reached
₱150/MT.[24]
Cosmetics Tax[edit]
Starting 2018, all cosmetic surgeries, aesthetic procedures, and body enhancements intended to
improve, alter, or enhance a person's appearance are now subject to a tax of 5%.
However, procedures necessary to ameliorate a deformity arising from, or directly related to a
congenital or developmental defect or abnormality, a personal injury resulting to an accident or
trauma, or disfiguring disease, tumor, virus or infection are tax -exempted.[24]
Tobacco Tax[edit]
The excise tax on cigarettes aims to reduce the amount of smokers and respiratory and
cardiovascular diseases one can catch from the act, as well as generate additional revenue for
health oriented programs and services.
From its original excise tax of ₱30 in 2017, the tax on tobacco increased to ₱32.50 on January 1,
2018, ₱35 on July 1, 2018, will increase to ₱37.50 on January 1, 2019, and ₱40 on January 1,
2020. Afterwards, it will increase annually by 4% from January 1, 2024.[24]
There are four taxes that were adjusted along with the TRAIN Law. Firstly, the documentary
stamp tax was increased by 100% except on loans with only 50% increase, but not for savings,
property, and non-life insurance. Secondly, the final tax on foreign currency deposit unit (FCDU)
was increased from 7.5% to 15% of interest income. Thirdly, capital gains tax of non-traded
stock was increased from 5% to 10% of final net gains. Finally, the stock transaction tax was
increased from 0.5% to 0.6% of total transaction value.[24]
Finally, there are three additional taxes that do not fall under the aforementioned categories.
These are the tax on lottery winnings and PCSO prizes, documentary stamp tax, and mining tax.
With the implementation of the TRAIN Law, all PCSO lotto prizes are taxed at 20% if the prize
exceeds ₱10,000. The documentary stamp tax has been doubled, resulting in stamp taxes ranging
from ₱1.50 to ₱3.00. Finally, excise tax rates on all non-metallic minerals and quarry resources,
and all metallic minerals including copper, gold and chromite, will be doubled, from 2% to 4%,
ss well as excise tax on indigenous petroleum, which will be doubled from 3% to 6%.[31][32][33]
The three main categories the TRAIN Law affects with its first package are "Growth in the
Economy", "Employment Generation", and "Effect on Inflation". The DOF projects the economy
to grow by 1.3% by 2022 with a 0.42% inflation due to the excise tax increase (this is still within
the 2-4% target inflation by the Bangko Sentral ng Pilipinas (BSP); it also predicts to create half
a million jobs over the next ten years, and eight million over the entirety of its life, as well as lift
250,000 Filipinos out of poverty. Through the increase in excise tax, Package 1 will be able to
generate Php134 Billion.[12] The actual effects in 2018 are elaborated below.
For the first quarter of 2018, the government was able to raise ₱619.84 billion. This represents a
16.4% growth in revenue compared to the first quarter of 2017. In monetary terms, the
government was able to raise ₱87.44 billion more in this quarter of 2018 compared to the
previous year. "The Philippine economy expanded by 6.8 percent in the first quarter of 2018,
making it still one of the fastest-growing economies in the region even as rising inflation reduced
consumption and productivity in some sectors."[6] DOF Secretary Carlos Dominguez III claimed
tax revenues grew by 18.2%, "exceeding the 9.7 percent nominal gross domestic product (GDP)
growth."[6]
Departments that saw immediate benefits from Package 1 include the Bureau of Internal
Revenue and Bureau of Customs, both with a 14.2% and 24.7% increase in revenue. This
translates to a total of ₱423.1 billion and Php129.8 for both departments respectively. Other
government departments were able to expand their investment and growths during the first
quarter as well due to the increase in income.
Insofar as expenditures go for the first quarter of 2018, the total amounted to ₱782.0 billion,
growing by 27.1%, which also outstripped the 9.7% nominal GDP growth due to the estimated
40.0% increase in capital outlays. Dominquez also said that the expenditure effort also rose by
2.73%, which is the highest increase since 2003. This results in a larger contribution towards
GDP growth. As such, revenue effort grew by 0.91%. In addition, public construction expanded
by 25.1%, thus boosting GDP growth by 0.4%. On the other hand, government consumption
increased by 13.6%, contributing an incremental 1.4% to the growth of the GDP."'Strong
macroeconomic fundamentals backed by tax reforms and the Build, build, build program will
continue to boost economic growth to the optimum 7-8 percent level as the competitiveness of
the economy rises and more jobs are created,' he said."[6]
"The inflation rate in June—which exceeded both government and market expectations—was the
fastest pace in at least five years. Year-to-date, inflation averaged 4.3 percent, above the BSP’s
2-4 percent target range."[7]"It peaked at 5.2 percent for the same month. For the previous
months, inflation was pegged at 4.6 percent and in the same period in 2017, 2.5 percent."[34]
This was primarily due to the higher annual rate posted in the heavily weighted food and non-
alcoholic beverages index at 6.1%. The country's food index went up by 5.8% in June 2018. It
was 5.5% in the previous month and 3.1% in June 2017. The following annual mark-ups were
also observed for the following food groups:

 Rice (4.7%)
 Corn (14.1%)
 Other Cereals, Flour, Cereal Preparation, Bread, Pasta and Other Bakery Products (2.4%);
 Meat (5.0%);
 Vegetables (8.6%);
 Sugar, Jam, Honey, Chocolate and Confectionery (3.9%); and
 Food Products not Elsewhere Classified (3.1%).
As for the rest of the food groups, they either slowed down or remained at their previous month's
rate.[34]
Socioeconomic Planning Secretary Ernesto Pernia claims that the inflation will most likely peak
on the third quarter of the year and start tapering off by October.[7]
The TRAIN Law finally took effect in January 2018. Since its implementation, there have been
numerous individuals for and against the new tax reform, such as Budget Secretary Benjamin
Diokno who has expressed support for the law as the additional revenues provide funds for
government initiatives.[35] Notable government figures in opposition of the current law, that is
they are calling for amendments or suspensions to specific excise tax increases or to the law as a
whole, include Sen. Risa Hontiveros, Sen. Bam Aquino and Sen. Grace Poe.[10][9]Ultimately,
President Duterte stated on June 2, 2018 "Well the law was enacted by Congress. I leave it to
Congress to decide whether or not to amend, suspend or modify the law. Leave it to Congress",
in a press briefing.[35]
The senators who voted for the bill were Senators Sonny Angara, Nancy Binay, Frank Drilon, JV
Ejercito, Chiz Escudero, Win Gatchalian, Dick Gordon, Gringo Honasan, Loren Legarda, Joel
Villanueva, Koko Pimentel, Grace Poe, Ralph Recto, Tito Sotto, Cynthia Villar and Migz Zubiri.
One of the goals of the TRAIN law is to make the economic environment of the Philippines
more appealing to foreign investors. The reforms being implemented by the Duterte
administration have been recognized and lauded by international institutions, leading to strong
investor confidence and better growth prospects for the economy.[36]This is also being pushed
forward by the Department of Finance by submitting its proposal for Package 2 of its tax reform
program to congress which aims to reduce corporate income tax rates and rationalize fiscal
incentives.[37]
According to the DOF's chief economist, Gil Beltran, the moderate rise in inflation is only
temporary and remains manageable under a robust economy even with the implementation of the
TRAIN law. It will be remedied by the increased spending on infrastructure and social services
to keep inflation in check in the future which was what the president was hoping to achieve with
the implementation of this law. TRAIN is seen as a long-term measure that would hope to push
the economy to a much higher development path, create more jobs and improve the living
conditions for our people. However this comes with the rising of inflation which would be
mitigated by lower income tax rates and implementing cash transfers for the short-term, and; the
health, education, social protection, and infrastructure programs in the medium- and long-
term.[36]]
One of the recurring problems that is being discussed when it comes to the TRAIN law is the
burden that it will impose to the poor. As crafted, the TRAIN promises to let marginal earners
and minimum salaried workers of smaller tax or even tax exemption. But critics are quick to
point out that the alleged windfall of tax-free income will be blown away when basic
commodities that the marginalized sector of society traditionally buy and consume every day
will now be sporting increased price tags that are out of reach and beyond the imagination of
poor families.[38]
There were objections made by the Makabayan bloc, a left-wing group whom filed a petition for
a temporary restraining order (TRO) against the law. The petition is anchored on the argument
that the tax law bill was invalid because there was no quorum when the House of Representatives
ratified the joint bicameral conference report on the measure, and there was no voting involved.
The petitioners provided links to official videos and photos that would show there was no
quorum “with barely 10 people on the floor.” The petitioners also provided that another
requirement was not met which was the majority vote. According to the petitioners, a vote
whether viva voce or nominal, was not taken. The official video of the process shows Tinio and
Zarate repeatedly objecting to the ratification, but Abu and Defensor continued with the process
until the voices of the petitioners were no longer heard because the microphone had been turned
off. Aside from the House rules, the petitioners said Section 16(2), Article VI of the Constitution
that requires a quorum was also violated.[39]
Three senators called for the suspension of the implementation of the Tax Reform for
Acceleration and Inclusion (TRAIN) law as consumers and transport groups complained of
soaring prices of commodities. These were on the grounds that the law was not beneficial to the
majority of Filipinos, due to the increase in prices of oil products and commodities, a family has
incurred an additional expense of ₱2,644 monthly for farmers and ₱3,640 for workers.[40]
Senator Bam Aquino wanted to pass a measure that seeks to amend TRAIN to protect Filipinos
from soaring prices. Aquino explained that the Senate's version of the TRAIN law had a
safeguard that would automatically suspend fuel excise tax if the forecast rate was exceeded and
this amendment was to bring that sole safeguard back. According to the senator, this was a
necessary step in order to protect the future well beings of the Filipino people.[41]
Since Duterte signed the TRAIN Law, protests were sparked since January 2018. For the
employees who worked under the minimum wage of ₱512, only ₱70 will be spend just for the
food in a day because of increasing goods.[42] Other budget issues such as house rent,
education, LPG, personal hygiene, etc. The militant groups feared that most of the Filipinos will
face hunger since the increase of excise tax in the market.

STUDIES
The TRAIN will provide hefty income tax cuts for majority of Filipino taxpayers while raising
additional funds to help support the government’s accelerated spending on its “Build, Build,
Build” and social services programs.

This tax reform package corrects a longstanding inequity of the tax system by reducing personal
income taxes for 99 percent of taxpayers, thereby giving them the much needed relief after 20
years of non-adjustment of the tax rates and brackets. This is the biggest Christmas and New
Year gift the government is giving to the people.

For the poorest 10 million households, the government is giving them targeted cash transfers of
PHP 200 per month in 2018 and P300 per month in 2019 and 2020, sourced from higher
consumption taxes that the rich will contribute, as well as better social services, healthcare, and
education. All these will prepare the people for better job opportunities.

In a separate message, President Duterte has vetoed certain provisions of the TRAIN. The vetoed
five line items are the following provisions:

1. Reduced income tax rate of employees of Regional Headquarters (RHQs), Regional Operating
Headquarters (ROHQs), Offshore Banking Units (OBUs), and Petroleum Service Contractors
and Subcontractors;

2. Zero-rating of sales of goods and services to separate customs territory and tourism enterprise
zones;

3. Exemption from percentage tax of gross sales/receipts not exceeding five hundred thousand
pesos (P500,000.00);

4. Exemption of various petroleum products from excise tax when used as input, feedstock, or as
raw material in the manufacturing of petrochemical products, or in the refining of petroleum
products, or as replacement fuel for natural gas fired combined cycle power plants; and

5. Earmarking of incremental tobacco taxes.

The TRAIN raises significant revenues to support the President’s priority social and
infrastructure programs, which will help realize his administration’s goal of reducing the poverty
rate from 21.6 to 14 percent by 2022. Some 70 percent of the incremental revenues will help
fund the government’s infrastructure modernization program, while the balance will go to social
services.

Starting 2018, the government expects to raise funds equivalent to about two-thirds of the
incremental revenues targeted under this tax reform law. The Congress has committed to pass the
rest of the TRAIN’s provisions representing the remaining one-third of the targeted revenues in
early 2018 to help us achieve our revenue and deficit targets.

With the people’s support and understanding, all these reforms will result in more and better
jobs, lower prices, and a brighter future for every Filipino.

The Philippine primer study states by Andronico Del Rosario that It’s not every day that
something tax-related makes waves on social media. Taxes usually mean a burden, but with the
implementation of the recently-signed Republic Act 10963, otherwise known as the Tax Reform
for Acceleration and Inclusion (TRAIN) Law, your upcoming payslip suddenly became a
welcome-ish sight.

Self-employed and mixed-income earners will also benefit from TRAIN. Yes, the government
didn’t leave you guys out. You have an option of using the new tax table or paying an 8% flat tax
rate if you earn less than Php 3 million yearly in gross sales and receipts.

Are you an expat or Filipino currently working for a multinational corporation who’s RHQ or
ROHQ is in the Philippines? Your taxes will be adjusted as well. You’ll be taxed 15% of your
gross income, i.e. everything that goes into your paycheck.

Oh, and by the way, your 13th-month pay and other benefits are considered tax-free if they don’t
crack the Php 90,000 ceiling.

We know how much of a burden paying taxes is if you’re a business owner. You’ll be happy to
know that TRAIN also lends a hand to businesses who don’t earn as much as the more
established names.

If your business earns less than Php 3 million yearly, you don’t need to pay the 12% value-added
tax.

All well and good, yes? We get more money in our pockets! But wait, there’s more.

More taxes collected elsewhere

“With the government collecting less from our paycheck, where will they get the funding for
their projects?” Well, here are the answers to that one burning question.

Yes, we all knew this was coming. Every time the price of petrol goes up, the rest of the market
gets affected. Make sure you have extra space in your monthly budget for higher fares and gas
prices, and probably for everything else you’ll buy in 2018.

Unless you drink a lot of natural fruit and vegetable juices, milk, coffee (ground, 3-in-1, and
powdered), or drink something to replace meals, you’ll be paying more for your cup, can, or
bottle of sweetened beverage. A flat rate of Php 6 or Php 12 per liter will be charged depending
on the sweetener used.

Of course, you can get around it by using coco sugar or stevia, but that’s up to the manufacturer.

Another part of TRAIN that created a lot of buzz was the automobile excise tax. Prices for any
four-wheeled (or more) vehicle that runs purely on gas or diesel and isn’t a pick-up or is not
100% electric will be charged a flat tax rate based on what you see here.

Iffy about going 100% electric? Go for a hybrid; it’ll be taxed at half the rates and you’ll be
doing Mother Nature a favor.

Donating to a cause? The same 6% tax rate applies to net donations that crack the Php 250,000
ceiling, regardless of your relationship to the one accepting your donation.

Want to know where else the government will get their funds through taxes? Here’s a quick
rundown:

Now that we’re all up to speed, let’s all pause and take in all that will come out of the
implementation of TRAIN.
According to Filane Mikee Cervantes ,the TRAIN law raises gov't revenue by 16.4% in Q1.

MANILA -- The national government managed to raise PHP619.84 billion in the first quarter of
2018, thanks in part to the Tax Reform for Acceleration and Inclusion Law (TRAIN). This
represents a 16.4 percent growth in revenue or equivalent to PHP87.44 billion year-on-year.

Department of Finance Secretary Carlos Dominguez III said on Friday the improved tax
administration due to TRAIN led to tax revenues growing by 18.2 percent, exceeding the 9.7
percent nominal gross domestic product (GDP) growth.

TRAIN, the first package of the government’s tax reform program, reduced personal incomes
taxes but increased excise taxes on fuel, sugar-sweetened beverages, and motor vehicles since
the law took effect last January 1.

Based on DOF data, the Bureau of Internal Revenue (BIR) hauled a total of 423.1 billion, higher
by 14.2 percent compared to the same period last year. Meanwhile, the Bureau of Customs
(BOC) raised PHP129.8 billion, higher by 24.7 percent year-on-year.

“Fiscal space expanded by TRAIN 1 and tax administration enabled government to boost
investments and growth in Q1,” Dominguez said.
Expenditures for the quarter amounted to PHP782.0 billion, growing by 27.1 percent, which also
outstripped the 9.7 percent nominal GDP growth due to the estimated 40.0 percent increase in
capital outlays.

The national government's budget balance was at a deficit of PHP162.2 billion for the first
quarter, up 95.5 percent from PHP83 billion a year earlier.

Dominguez, however, noted that the budget deficit settled at 4.1 percent of GDP in Q1, as
targeted.

Tax effort rose by 1.03 percentage point, which Dominguez said was the highest first quarter tax
effort ever achieved.

The Finance chief said expenditure effort also rose by 2.73 percentage point, the highest increase
since 2003, thus boosting its contribution to GDP growth. Revenue effort, meanwhile, rose by
0.91 percentage point.

Dominguez said public construction expanded 25.1 percent, boosting GDP growth by 0.4
percentage point while government consumption rose 13.6 percent, contributing incremental 1.4
percent to growth.

“Strong macroeconomic fundamentals backed by tax reforms and the Build, build, build program
will continue to boost economic growth to the optimum 7-8 percent level as the competitiveness
of the economy rises and more jobs are created,” he said.

The Philippine economy expanded by 6.8 percent in the first quarter of 2018, making it still one
of the fastest-growing economies in the region even as rising inflation reduced consumption and
productivity in some sectors. (PNA)

According to Anthony Q. Esguerra , “Senator Paolo Benigno Aquino is banking on the support
of his colleagues to immediately pass a measure that seeks to amend the Tax Reform for
Acceleration and Inclusion (TRAIN) to protect Filipinos from soaring prices.
Aquino explained that the Senate’s version of the TRAIN law had a safeguard that would
automatically suspend fuel excise tax if the forecast rate was exceeded.
ADVERTISEMENT
On May 10, Aquino filed SBN 1978, which he said would bring back this safety net.
“This is a very reasonable amendment that can help alleviate the burden of high prices on our
fellow countrymen,” Aquino said in a privilege speech.
He noted that before the implementation of the TRAIN law, the inflation rate was at 2.9%. This
rose to 4.5% when the tax reform law took effect.
Aquino expressed hope that the amendment would be passed right away since the provision was
already approved by the chamber.
The suspension of fuel excise tax is being eyed as an option that would help roll back the price of
goods and transportation.
READ: Poe calls for suspension of fuel excise tax
Aquino said the P70 billion savings in the 2019 national budget would make up for the losses
that would be incurred by suspending the fuel tax.
He noted that the government underspent P390 billion in 2017.
The senator also called for the immediate implementation of the unconditional cash transfer
program that is a component of the TRAIN law”.
According to Philippine Statistics Authority, Department of Public Works and Highways, and
DOF staff estimates, the
The tax reform will be able to fund investments in education, achieving a more conducive
learning environment with the ideal teacher-to-student ratio and classroom-to-student ratio. With
the tax reform, we can invest more in our country's healthcare by providing better services and
facilities. And the additional revenue raised by the tax reform will be used to fund the
infrastructure program of the Department of Public Works and Highways (DPWH), which
consists 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. The proposed tax reform program aims to provide the needed additional revenues that
would fund our country’s investment needs, promoting better lives for Filipinos.”
Following a request from the Department of Finance (DOF), President Duterte certified on
Monday as an urgent measure for congressional approval the eight-month-old Tax Reform for
Acceleration and Inclusion Act (TRAIN), which is crucial to the financial sustainability of the
government’s ambitious agenda to sustain the country’s growth momentum and accelerate
poverty reduction via a massive spending on infrastructure, human capital and social protection
for the poor and vulnerable sectors.

“We are transmitting this letter of President Rodrigo Roa Duterte certifying to the necessity of
the immediate enactment of House Bill No 5636 (the proposed Tax Reform for Acceleration and
Inclusion Act…” Executive Secretary Salvador Medialdea said in his letter to Speaker Pantaleon
Alvarez dated May 29.

“The benefits to be derived from this tax reform measure will sustainably finance the
Government’s envisioned massive investments in infrastructure thereby encouraging economic
activity and job creation, as well as fund the desired increase in the public budget for health,
education and social programs to alleviate poverty,” President Duterte said in a separate letter
sent to Senate President Aquilino Pimentel III.

Presidential Legislative Liaison Office head Adelino Sitoy was also furnished copies of the
letter.

Finance Secretary Carlos Dominguez III made this appeal in a memorandum to the Chief
Executive, in the hope that the House of Representatives, from where all tax and budget laws
originate, could pass the TRAIN, which is the first package of the Comprehensive Tax Reform
Program (CTRP), before Congress goes on its sine die adjournment on June 2.

Both the House and the Senate will reopen for the Second Regular Session of the 17th Congress
on July 24, when President Duterte is to deliver his second State of the Nation Address (SONA).

“We believe that the President’s certification of the tax reform bill as an urgent legislative
measure can help ensure timely and full passage of the tax reform package before the close of the
session on June 2, 2017, so that the benefits of the reform can be felt sooner,” said Dominguez in
his memo to the President.

TRAIN aims to make the country’s antiquated tax system simpler, fairer and more efficient,
especially for the poor and low-income families, by making sizable cuts in personal income tax
(PIT) rates—and to make up for the projected revenue loss, and at the same time raise funds for
the Duterte administration’s massive expenditure program, by expanding the Value Added Tax
(VAT) base and adjusting excise taxes on oil, automobiles and other products.

Dominguez pointed out in his memo the “dire consequences” of the Congress’ failure to pass
soon enough this TRAIN bill, given its design to help guarantee a steady revenue flow for the
Duterte administration’s unmatched public investments over the next half-decade to support its
envisioned “Golden Age of Infrastructure,” attract investments and create jobs, cut the poverty
rate from 21.6 percent to 14 percent, and transform the Philippines into an upper middle-income
economy by the time the President leaves office in 2022.

The finance secretary said that without the TRAIN bill, the government’s strategy to embark on
an aggressive expenditure program by raising deficit spending to three percent of the Gross
Domestic Product (GDP) would lead to an “unsustainable fiscal position,” which, in turn, could
trigger a credit rating downgrade possibly costing the government an extra P30 billion in annual
debt servicing and P100 billion more in higher borrowing costs for the public.

Such a scenario, he said, could leave the government “more vulnerable to fiscal risk” because it
would adversely affect the funding source for increasing state liabilities such as the pension of
uniformed personnel and indigent senior citizens. With many countries including China already
being downgraded, t h is tax reform bill serves as our country’s immunization from such threat.

More importantly, he said, the non-passage of the TRAIN bill by the Congress would “disrupt”
the planned increase in public investments in infrastructure, education, health and social
protection, which the government seeks to undertake to make sure that the country’s continued
high growth truly leads to the economic inclusion of all Filipinos.

“To achieve these objectives, the Administration plans to increase the budget for infrastructure
from P795 billion in 2016 to P1.832 billion in 2022 to support the Golden Age of Infrastructure,
the budget for education from P551 billion to P1.269 billion, the budget for health from P133
billion to P272 billion, and the budget for social protection, welfare and employment from P240
billion to P509 billion,” he said.

Dominguez said that, “To sustainably finance these massive investments in infrastructure and in
the people, tax policy reform will be crucial alongside tax administration and budget reforms.”

“Given the significance of the tax reform in funding the priority programs of the President that
will uplift the lives of the poor, in particular the Golden Age of Infrastructure, and in maintaining
strong macroeconomic fundamentals, we request the President’s full endorsement and support
for the tax reform,” Dominguez said.

He stressed in his memo to the President that, “The tax reform seeks to achieve a simpler, fairer,
and more efficient tax system characterized by lower rates and a broader base, to encourage
investment, job creation, and poverty reduction.”

The DOF submitted CTRP’s first package to the Congress last Sept. 26 and was filed as HB
4774 in January 2017 by Quirino Rep. Dakila Carlo Cua, the chairman of the House ways and
means committee that is in charge of writing tax laws.

Following 13 public hearings in the course of four months, the House ways and means
committee approved last May 8 a substitute measure—HB 5636—that had consolidated HB
4774 with 54 other tax-related bills. HB 5636 has moderate changes from the original measure
(HB 4774) endorsed last year by the DOF to the Congress.

HB 5636, which had over a hundred co-authors by the time the Cua-chaired panel formally
submitted it for plenary deliberations last May 23, was also taken up and approved by the House
committee on appropriations, to which it was referred earlier this month to go over the bill’s fund
earmarking provisions. The House appropriations panel is chaired by Davao City Rep. Karlo
Alexei Nograles.
Senate President Aquilino Pimentel III filed the Senate version of the measure—Senate Bill No.
1408—last March, and the chamber’s Committee on Ways and Means chaired by Juan Edgardo
Angara has thus far conducted six (6) public hearings on it.

Under the 1987 Constitution, all revenue measures must originate from the House of
Representatives, which means that the Senate can start plenary discussions on tax and
appropriations or budget bills only after the House has passed its versions of these measures.

The House of Representatives can only vote on third and final reading on any bill that it has
already passed on second reading after copies of this measure are given to lawmakers at least
three days before the date of final voting. This rule can be dispensed with, however, for bills
certified as urgent by the President.

According to Dominguez in his memo, this TRAIN bill is “expected to help reduce poverty rate
from 21.6 percent in 2015 to 14 percent in 2022, lifting some six million Filipinos out of poverty,
and helping the country achieve upper middle-income country status where per capita gross
national income increases from $3,500 in 2015 to at least $4,100 by 2022.”

Dominguez told the President in his memo that the, “Non-passage of Package 1 will be fiscally
irresponsible and will have dire consequences on both the macro-fiscal position of the country
and more importantly on the lives of the poor and vulnerable.”

“From a macro-fiscal perspective, the deficit of three percent of GDP will be breached, leaving
the country susceptible to an unsustainable fiscal position and undermining hard-fought plans in
improving macroeconomic fundamentals,” he said.

“A deficit above three percent of GDP can lead to a credit rating downgrade to below investment
grade.,” he said. “This can cost the government around P30 billion more in debt servicing and
the public up to P100 billion higher borrowing costs. It can also leave the government more
vulnerable to fiscal risk as increasing liabilities, such as pension of uniformed personnel, will
lack funding source.”

He concluded in his memo that, “More importantly, non-passage of Package 1 will disrupt the
much needed increase in spending on infrastructure, education, health and social protection that
can help improve the lives of the poor and vulnerable.”

Minus the TRAIN bill, there will be less or partial funding for, among others, the construction
and rehabilitation of school buildings, farm-to-market roads, hospitals and other health facilities;
conditional cash transfer programs for the poorest households; and the social pension for
indigent senior citizens, he said.

The key features of the substitute bill include the following:

• Lower PIT rates as proposed by the DOF but indexed to cumulative Consumer Price Index
(CPI) inflation every three years;
• A flat rate of six percent for the estate and donor’s taxes;
• Broadening the tax base by removing special laws on VAT exemptions, including those for
cooperatives, housing and leasing, but retaining exemptions for senior citizens and persons with
disabilities;
• Staggered “3-2-1” excise tax increase for petroleum products from 2018 to 2020 but with no
indexation to inflation, and liquefied petroleum gas (LPG) used as feedstock to be exempted
from the hike;
• A five-bracket excise tax structure for automobiles with a two-year phase-in period for the tax
increases;
• A tax on sugar-sweetened beverages or SSBs equivalent to P10 per liter; and
• Earmarking of 40 percent of the proceeds from the fuel excise tax increase for social protection
programs for the first three years of the tax reform measure’s implementation.

HB 5636 also includes tax administration reforms such as the fuel marking and monitoring
system to curb oil smuggling, the use of electronic receipts, and the mandatory connection of the
point-of-sale (POS) system of all establishments to the BIR, and the relaxation of bank secrecy
laws for investigating and combating tax fraud. Metro Manila (CNN Philippines, November
28) — The Senate has approved on third and final reading its version of the tax reform package
that will fund government infrastructure projects and reduce income tax rates for roughly 99
percent of taxpayers.

The bill also raises prices of consumer goods such as sweetened beverages, fuel, and Liquefied
petroleum gas (LPG).

Voting, 17-1, the Senate passed Senate Bill 1592, also known as Tax Reform for Acceleration
and Inclusion (TRAIN), on second and third reading on Tuesday.
TRAIN is the first package of the comprehensive tax reform program spearheaded by the Duterte
administration. Its goal is to create a more just, simple, and more effective system of tax
collection.

Under the Senate version of the package, taxpayers with an income of 250,000 and below
annually will be tax-exempt starting 2018. This includes self-employed individuals and
professionals.

The House of Representatives' version of the tax reform package also has a tax exemption ceiling
of 250,000.

"Sa kasaysayan ng pagbubuwis sa bansa, ito na ang pinakamalaking income tax relief na
maipagkakaloob natin sa mga manggagawa," bill sponsor and Senate Ways and Means
Committee Sen. Sonny Angara said.

[Translation: This is the biggest income tax relief we've given to workers in the country's history
of taxation.]

This translates to income tax exemptions for those earning approximately 21,000 or less per
month.

Under the current tax scheme, a taxpayer earning 250,000 per year pays an income tax of 50,000
annually.

Senate estimates the bill will spare 6.8 million of 7.5 million individual income taxpayers from
paying taxes. This is more than triple the 2 million minimum wage earners currently exempt
from tax.

Aside from exempting millions from income taxes, the new scheme will also lower income tax
rates for those earning P2 million and below.

It will retain rates for taxpayers earning more than P2 million but not over P8 million, and
increase by three percentage points tax rates for those with incomes above P8 million.
The bill also retained the P82,000 tax exemption for 13th month pay and other bonuses.

Angara said the tax reform would "put more money in the pockets of Filipinos."

"Gusto nating gawing patas ang ating income tax system na naging hindi makatarungan sa
pagdaan ng panahon," he said.

(Translation: We want to make our income tax system fair because it became inequitable with
the passing of time.)

3-in1 coffee, milk exempted from tax

The Senate TRAIN bill also outlined provisions --including some exemptions-- for the
government's proposed tax on sweetened beverages.

Under Senate's tax reform bill, all kinds of milk are tax-exempt given their nutritional value.
Three-in-one coffee is also exempt from taxes, as Senators say most of its consumers are low
income earners.

Other beverages excluded from tax include natural fruit and vegetable juices, unsweetened tea
and sweetened beverages that use coco sugar and stevia.

Meanwhile, beverages using caloric and non-caloric sweeteners will be taxed at P4.50 per liter
and beverages using high fructose corn syrup at P9 per liter.

This differs from the Lower House's proposed P10 per liter tax for beverages using local sugar,
and P20 per liter tax for those using other sweeteners, as Senate said this would violate an
international trade rule that bars taxing imported products at higher rates to favor local products.

LPG, fuel taxes, additional taxes

Kerosene is likewise excluded from excise tax, as some 3 million households in far-flung areas
use it as fuel for cooking and lighting.

However, the Senate has levied taxes over other fuels and products.
The Senate spread the P3 rate increase for Liquefied petroleum gas (LPG), which is used for
cooking, over three years. This will result in a 1 peso per year increase from 2018 to 2020.

Meanwhile, the proposed P6 increase in diesel and bunker fuel will be collected in 3 tranches -
P1.75 next year, P2 in 2019 and P2.25 in 2020. Diesel and bunker fuel oil are mostly used for
transportation.

The Senate also modified existing automobile excise taxes in favor of a simpler two-tier scheme.
It said only 80 percent of Filipino households own cars.

Under the new scheme, cars priced up to P1 million will be charged 10 percent tax, while those
worth more than 1 million will now be taxed at a 20 percent rate.

The TRAIN bill will also increase coal excise tax from P10 per metric ton to P300 per metric ton
in a span of three years. The increase will be in increments of P100, starting from P100 in 2018.

Meanwhile, cosmetic procedures done for aesthetic purposes will be levied with a 10 percent tax.

The excise tax rates for all non-metallic minerals and quarry resources, and all metallic minerals
were also raised from the current 2 percent to 4 percent.

VAT exemptions
The TRAIN bill, however, exempts small businesses with total annual sales of 3 million pesos
and below from VAT. This, as small and micro businesses represent 98 percent of all registered
businesses in the country.

VAT exemptions for raw food or agricultural products, health and education, as well as of senior
citizens, Persons with Disability (PWDs), business process outsourcing (BPOs), and
cooperatives will be retained.

The sale of prescription drugs and medicines will be VAT-free for all.
"Alam naman natin na pag nagkasakit ang isang tao, minsan talagang nababangkarote ang buong
pamilya... Palagay ko, kapag binawasan mo ng 12 percent VAT, ang laking ginhawa," Angara
said in an interview before the readings.

(Translation: We know that when someone gets sick, families can get bankrupt… I believe
reducing the 12 percent VAT will be a huge help to them.)

Mass housing projects that are worth 2 million pesos and below located outside of Metro Manila
will also continue to enjoy VAT exemption.

Revenue to go to infrastructure, social protection, military

Following its approval in the Senate, the TRAIN bill is set to be tackled by the Senate and the
House of Representatives in the bicameral conference committee.

According to Senate Minority Leader Frank Drilon, this may be the "real battleground" as
lawmakers tackle contentious provisions of the bill.

This includes differing Senate and House provisions on petroleum, automobile, and sweetened
beverage taxes, among others.

Critics of the tax reform program have also expressed concern it may burden the poor due to
additional taxes on goods.

The Finance Department estimates the government can generate up to P130 billion additional
revenue from the Senate's version of TRAIN.

This revenue is pegged to fund government projects-- especially the administration's ambitious
"Build, build, build" program, which is forecast to spend up to P9 trillion for infrastructure
projects till 2022.

Under the Senate bill, revenue generated from the tax reform will be allocated to infrastructure
programs (60 percent), social protection programs (27 percent) and military modernization
programs (13 percent).
Senate President Koko Pimentel said the tax reforms are necessary to fund long-term
investments by the government.

"Like any investments, we must look beyond the short-term challenges this measure poses and
focus on the significant, tangible, and long-termbenefits that countless Filipinos today, and in the
future, will enjoy," the Senate President said.

For 5 years, revenues generated from TRAIN will only be used for specific programs. Not more
than 70% will be used to fund infrastructure projects, such as the Build, Build, Build program
and other projects that address road congestion through mass transportation and the creation of
road networks.

Part of the 70% will fund the upgrading of existing military infrastructure, the creation of sports
facilities in public schools, and help increase access of potable water in all public places.

The remaining 30% of TRAIN revenue will be used for the targeted cash transfer (TCT) program
as well as other programs that invest in education, health, employment, social protection, and
housing.
 CHAPTER 3

RESEARCH METHODOLOGY

This chapter presents the discussion of the method used, research environment, validation of
instrument, scoring procedures, data gathering procedure, and statistical treatment of the data in
this investigation.

Method Used

The descriptive correlational method of research was used in the study with the aid of
questionnaire checklist. The data were gathered primarily through the research instrument.
Supplementary data were used through observation and interviews. A correlational analysis was
performed to determine the significant relationship between the independent and dependent
variables in the study.

Research environment

The implemented TRAIN law is an important concern to the people of our country.The
objectives of First, it intends to simplify the previous system to make it more straightforward and
intuitive.Second, it intends to create a more "just" taxation scheme, wherein taxation is staggered
and distributed on the basis of financial capability and the underprivileged are able to reap more
advantages.Third, it intends to improve the efficiency by which tax is collected, particularly tackling
issues of compliance.And Fourth, it increases the tax burden felt by the general population thus
increasing the overall inflation rate is a good sign for us Filipinos to make our country a
progressive one.

We are conducting our research at the several Barangays of Dapitan City, Zamboanga del Norte,
namely: Sigayan, Aseniero, Masidlakon, San Nicolas, Barcelona, Ba-ao, Opao, Dawo, Banonong,
Sta. Cruz, Talisay, Potol, Bagting, Cawa- Cawa, Sto. Nińo, Taguilon, Polo, Liyang, Sulangon,
Burgos, Ilaya, San Pedro, Owaon, Antipolo, and San Vicente with a total of 25 Barangay
Treasurers.

Respondents of the study

The respondents of the study were the Barangay Treasurers in the Rural, Urban and coastal
Barangays of Dapitan City, Zamboanga del Norte. Table 1 shows the respondents of the study.

Table 1 Respondents of the Study