Surban, Quendrick Keith E.

January 6, 2018
BSA-4A Prof. Luz Go

HW #1: “TRAIN (Tax Reform for Acceleration and Inclusion) Bill”

Year 2018 shall be one in which the Philippine will undertake a comprehensive tax reform program
where this bill shall affect the economic aspects of the country as well as the financial standing of our
fellow citizens. It is a fact that this bill shall aim on producing revenues for the administration’s massive
infrastructure programs as well as other beneficial aspects that such bill will produce in the near future
where by 2020, with the help of the bill, it envisions that it may reduce Poverty rate of the Philippines
from 26 to 17% (or some 10 million Filipinos uplifted from poverty).

In the view of the government, this reformation will truly change the Philippine for its citizen,
however, with the imposed implementation to which this bill will enforce, some citizen views it differently
with that of the government. With that said, the following are some of the highlights to which the
comprehensive tax reform will impose to the country, where, this paper shall distinguish the new tax
amendments and compare it with the amended provisions in the 1997 tax code. Also, this paper will also
show some facts and opinions with regard with such tax reforms where opinions may range from the pros
and cons of the implemented amended provisions.

ADJUSTMENTS IN THE PERSONAL INCOME TAXATION

The Tax reform has adjusted the implemented tax rates imposed upon both for compensation
income earners and for self-employed and/or professionals as shown. As you can

1997 TAX CODE TAX REFORM RATES

NOTE:
see on the difference between the two tables, it is quite apparent that the government has taken the leap
of finally adjusting the overdue tax table which has not yet updated since 1997. It is said that this
implementation is “the Christmas Gift” of the government administration for the year 2017 because the
ONLY pro-outcome from this amendment is that it will increase the take-home pay from income earners
coming from low to middle class. Without a doubt, this new income tax rates are pro-poor to the point
that it only increases the revenues of almost all Filipino income earners. In fact, figure 1 shows that “by
exempting all incomes below P250,000, around 83% of current taxpayers will be exempt from personal
income taxes. Only the richest Filipinos (the top 1% of taxpayers) will be hurt by higher tax rates.”
(Rappler.com).

However, this glaringly decrease in income tax

rates might massively increase other tax rates which
may have a burdensome effect on the citizen: like
petroleum tax, tax on sweetened beverage etc. “In the
end, poor Filipinos will bear the brunt of this tax
reform program as it will increase the prices of basic
commodities,” said by Senator Bam Aquino. I agree
with that of what the Senator has said. With all the
glamourous things we receive, of course there is but a
downside to all this benefits and whats worse is that,
the negative effects may be even heavier than that of
its positive. Though yes, the income tax rates have
finally been adjusted after longly waiting for it,
however, this comprehensive reform, on my point of
view, only caters that of the middle and higher class. It
still widens the gap between low and middle class
earners to the point that the lower demicile of the low
income class earners most probably don’t have jobs or
earn at a minimum salary range. These people, yes,
Source: Better Buwis
may be granted the sweetness of not paying taxes, but
some of their living expenses or family expenses would increase and such might not shoulder the increase
in take-home pay. This

I am not saying that the government is not giving attention to the poor and most especially the
jobless. No, in fact the government has mitigating programs in implementing the tax reform like for
example the “TARGETED CASH TRANSFER PROGRAM”, “PANTAWID PASADA”, “PANTAWID KURYENTE”
and other programs. But, in my opinion, some mitigating programs are very shaky and vague like for
example “The relief from cash transfers will be gone after the first year while their tax burden even
continues to increase from the second year onwards.” (IBON.org) If the government does not properly
carry out this programs like distributing the reliefs, then the tax reform would only go to waste for its
purpose to uplift poverty would only result the opposite of it. With the given condition of how our
government works, more particularly money corruption, this program may otherwise, on my opinion,
might not work 90- 100% that effective on extenuating the inflation in some consumer prices for the poor.
 Another opinion to which I want to point out that the idea of transferring the tax burden to the
rich and allocating the tax collections for the benefit of the public is very pertinent and well-chosen type
of tax system considering the fact that the Philippines compose of some of the richest people in the
business industry. Though I am not discriminating the rich and depriving them of their earnings but rather
since they already are financially secured, it is of the least that they help their fellow countrymen or rather
their country itself to prosper and develop. But, we all know that some rich people in the Philippines
already contributed to the country for their care foundations and other programs supporting the lower
bracket of the social pyramid. Still, even though the government has still minor and major glitches to how
it operates, the tax collected may be of used to all the public. Also, with the new tax rates emphasizing
the transfer of the tax effects to the 1% of rich people, based only on my opinion, this might make an idea
for those who are in the 1% to practically and illegally evade such taxes since they are at the top and they
have the devices to persuade and cheat their way on the newly revised tax rates.

ADJUSTMENTS ON PETROLEUM EXCISE TAX

With the decrease in the income tax rates comes with the increment in other taxes and one of
such taxes is the Petroleum excise tax. In this adjustment, for the first year of the effectivity, all petroleum-
based products ranging from lubricating oils to pyrolysis gasoline will result to an increase in excise tax.
To show the full adjustments to petroleum excise tax, see figure 2 below. As you can see from the figures,

1997 TAX CODE TAX REFORM RATES

Specifically, the decrease in the income tax rate is shouldered by this increase in petroleum tax rate in
which the government expects to earn billions from increasing such tax. As you can see, this adjustment
has affected the consumer good known as oil which may, at most, affect the prices of petroleum-based
products. “new taxes on oil will increase prices as petroleum products are widely used, with
transportation accounting for more than 80% of demand as per Department of Energy 2017 data”,
stresses by IBON foundation in which this will affect the cost of travel for commuters. However, it is said
that such increase in taxes would be mitigated by some of the programs as mentioned earlier. Also, the
department of finance support such tax increase whereby they have cited past instances in which
petroleum prices were high, but it did not stop the Philippine economy from flourishing. “Even if we had
the highest prices of petroleum in 2008, in 2011, our economy continued to grow up to 7%,” Finance
Undersecretary Karl Kendrick Chua said.

My opinion on this matter is that since oil, gasoline and other petroleum substance is of important
in this time of modernization, mostly those inclined in transportation services and public vehicles, such
taxes would give the citizen a bad impression that since such products have higher taxes, then of course
the mindset of the people is that the effect would cause an inflation upon the prices on which some
products or services depend on. I on the other hand, based on my judgement, there is nothing wrong on
increasing such taxes but the way or rather the amount to which the government increase such rates is
not justifiable to increase it twice or more. This price increase will also affect the cost of trading leading
to more fare hikes and soon or later, greater increase in raw materials and manufactured goods and
services. For example, is that in shipping and trucking where the Philippine Inter-Island Shipping
Association (PISA) accounts fuel consumption of about 40%-50% of a ship’s operational costs. Thus, Atty.
Aguilar, executive director of PISA, said that “any addition to the price of fuel will jack up operational costs
for vessels… Since domestic shipping is deregulated, ship operators may impose a fuel surcharge or freight
hike to counter higher shipping cost.” – (Portcall.com)

The only pro effect that I can see of this implementation is that this is one of which in the tax
reform which gave way to the decrease in income tax of income earners as well as a source to which tax
collected in this aspect would be used to cushion the effect of the tax reform. Also, another pro-effect
from this implementation is that fellow citizen might become discouraged to purchase or use their vehicle
due to the expected increase in gasoline price, thus, may result to fewer private vehicles in the road,
creating less congestion and smoother travel. Nevertheless, it is still unclear if such would be a pro-effect
depending on how the results of the tax reform would take because the burden might be heavier than
that of the benefit to which the citizen may receive. Cons of this is that of a possible inflation on prices
that is dependent on petroleum substances which would affect transportation, business and utility.
ADJUSTMENTS ON AUTOMOBILE EXCISE TAX

Today, as you can see the roads in Metro Manila, one thing you will always experience whether
you live in the Philippine or not is the traffic. The endless lines of cars pile up the roads and sooner or
later, your 30-minute travel time to your job becomes a 2-hour journey of countless waiting. The
government has finally amended the tax rates when it comes to automobile as shown below. As you can

1997 TAX CODE TAX REFORM RATES

see, it is quite evident that the impact on this implementation is quite massive for on this specific
provision, the new tax rates is that of doubled to the old one. In my opinion, I am totally not against such
implementation because I agree with the government that the solution in the congestion in the city is that
of removing the number of vehicles in the road and what could be a more precise move for the
government to do this but to raise that of the tax imposed on buying new vehicles.

It may be of selfish on my part because I am pointing out that I don’t want anyone to have a car,
its just that my point is what is the sense of buying a car if your vehicle is moving below 10 km/hr. It is
time for the government to seriously fix up the congestion in the city and I think this provision is one way
of saying it. I know there are number of ways of controlling such congestion like the “build, build, build”
program to which this tax reform is addressed to where almost 70% of the tax revenues would be
allocated to infrastructure. But, again, what’s the sense of having more roads if the ratio of cars and roads
is 3 is to 1. Though traffic may be the cause of something else beside the quantity of automobile in the
roads, still, the government should start to regulate and improve our traffic conditions. Maybe in the
future, when traffic is no longer an issue here in the Philippines, maybe by then they may reconsider the
tax imposition on automobile but for now, it is better to try and control the quantity of cars with the most
effective means possible.

Another positive thing in which this implementation is encompassed of is that electric vehicle has
no tax impose upon it. With that said, I can see that the government is eyeing on modernizing our
community. Nowadays, more and more countries are developing not only in economic aspect but as well
in technological aspects and therefore, I see this as somewhat favorable and pro-effect because it invites
citizen to adapt to the technological changes. Also with electric vehicle, it is less dangerous to the
environment since it uses harmless resources for it to run compared to other types of vehicles.
NEW TAXES ON SWEETENED BEVERAGES

In this comprehensive tax reform, new taxes were also imposed to other consumer products such
as sweetened freshener and drinks that common citizen buy these days like soft drinks, juices and the like.
You can see that such rates were also one of the cushion taxes to carry the lost revenue from the decrease
in income taxes that the reform also have introduced.

Based on my opinion, the pro-effect in

TAX REFORM RATES
implementing this taxes on such products is that
Using caloric and non-caloric sweeteners P 6 per liter the government is leaning towards into a healthier
Using high-fructose corn syrup P 12 per liter lifestyle for the Filipino Citizen, where, rather than
buying sodas and other junkie drinks, they would be
Excluded from the tax:
inclined on just drinking water or other beverages
- All Milk that is much leaner on making their health
- Ground and 3-in-1 coffee condition to improve. I’m not saying that I am
- 100% natural fruit and vegetable juices
totally on-board on this implementation but rather
- Meal replacement and medically indicated
beverages the concept of “becoming healthier” is very ideal
- Beverages sweetened with coco sugar or stevia for there are so much junk foods that invites us and
spend our money on such products. Even for
families, they would be influenced on giving their
children to a more healthier option and at the same time, by doing so, they may save up money for other
necessary amenities that the family needs. However, this is a sad part on the younglings and other people
who are soda-enthusiasts because it gives a bad effect on them, where, they may pay a higher price just
to satisfy their cravings of such beverages.

Furthermore, still basing it on my opinion, one negative effect that this may do to the Philippines
is that it may affect the prices of restaurants and other fast-food chains which usually serve such drinks.
This may affect their business in a way that operating costs related to such materials would increase the
expenses of their business. And, since they cannot only serve water to the customers, they will be forced
to adapt to such dramatic changes of imposing sudden taxes on beverages. One example that I can show
that this effect has already affected some businesses is
that of “S & R”. Upon imposing the new taxes on
sweetened beverages, some branch of S & R has notified
the public that they would no longer serve unlimited
soda to its customers. Though people go to S &R for their
pizza, still, this new tax made drastic changes for how a
business would run its business. Thus, even if the
concept if very ideal and realistic to think of, of course
some people would still have to adjust to sudden
changes and cope with the scenario they are about to
face due to this tax reform the government has
introduced.
ADJUSTMENTS ON TOBACCO EXCISE TAX

1997 TAX CODE TAX REFORM RATES

Current Excise Tax on Cigarettes P 30 per pack January 1 2018 – June 2018 P 32.50 per pack

July 2018 – December 2019 P 35 per pack

Year 2020 – Year 2021 P 37.50 per pack

Year 2022 – Year 2023 P 40 per pack

Year 2023 onwards 4% annual

indexation
The pros here is that of the same concept of what the new taxes for sweetened beverages, where,
they are trying to convey “a healthier lifestyle”. I am totally on board with this increase in tobacco products
because, on my point of view, cigarette smoking severely just causes a social nuisance to the community
and not only the individual health. In our community, more and more people are being persuaded to take
cigarettes just to relieve the stress from their work and life problems. There are so many ways of
discharging low moments in our life like family, going out to malls, seeing a movie and other leisure that
is not harmful to the environment and to other people. With the smoking ban implemented in the
Philippines, this new reform on tobacco taxes will further reduce the rate of smokers as well as those
people who are or may be suffering from cigarette smoking.

I can’t think of any cons in this new implementation because though, yes, the prices of cigarettes
may increase, and consumers of cigarettes may have a bad outlook on such circumstances, however, no
matter how much these cigarettes increase, they would continue to buy it even at some degree for most
smokers in the Philippines, in my opinion, has already the level where they see cigarettes as a necessity
and smoking as a daily activity to their lives. Also, at the very least, the taxes collected from these products
would go for a better cause and I commend the government for using such method, if ever they intended
such. Also, you can see here in the Philippines, cigarettes are really a big boom because even the poor can
find ways of managing to buy a pack of cigarettes. Even if they live only in the streets, they find means of
grabbing a cigarette. You can even see children use cigarettes in the streets nowadays. With this, I think
if people would not change their smoking habits, much taxes can be collected from tobacco products.

If I were them I would go all out with the increase of this tax like that of the taxes on petroleum
products because this way of doing it would create a two-folds effect. However, I am not saying that they
should drastically cut smokers from their cigarettes, that would be a suicidal measure and that is why I
also like the way how they would give an incremental effect rather than one big impact to the prices for
cigarettes. Still, in my opinion, cigarette smoking will always be bad, no matter how you put it, its bad for
you, the environment and the community.
OTHER AMENDMENTS AND NEW TAXES THROUGH INFORGRAPHICS

In the next pages of this paper, I have used compiled infographics to show the other highlighted amended
provisions and used some articles to show other amended provisions under the comprehensive tax reform
and other new taxes that has impacted the Philippines
OTHER AMENDMENTS:

Simplified tax compliance

Apparently, the Philippine tax system is a very complicated one. This was certainly considered by
Congress when it enacted the Train law. Consequently, Train introduces amendments which are geared
towards simpler tax compliance. Some of these amendments are:

1. The Income Tax Returns shall not be more than 4 pages

2. The Tax Return for final and creditable withholding taxes shall be filed quarterly instead of
monthly
3. Regarding estate tax, the following measures were adopted to simplify its computation and
payment:
o In lieu of actual funeral expenses (up to P200,000) and medical expenses (up to
P500,000), Train increases the standard deduction (wherein no substantiation is
required) from P1,000,000 to P5,000,000
o Notice of death is no longer required
o CPA certification is now required only if the gross estate is above P5,000,000 (up from
P2,000,000)
o The deadline for filing of estate tax return is now one year from death (before, 6 months
from death)
o Bank deposits left by the decedent may be withdrawn by the heirs subject only to 6%
withholding tax. Before a certification from the BIR that estate tax has been paid was
required.
4. Beginning January 1, 2023, the filing of VAT Return and payment of tax shall be done quarterly
instead of monthly
5. The BIR is required to act on application for VAT refund within 90 days. Otherwise, the BIR
official, agent or employee will be criminally liable.
6. The Financial Statements of a taxpayer should be audited if the gross annual sales, earnings,
receipts or output exceed P3,000,000 (up from P150,000)
REFERENCES:

PWC Philippines. (Dec. 28,2017). “Tax Alert 34: Tax Reform for Acceleration and Inclusion – Package 1”.
Retrieved from https://www.pwc.com/ph/en/tax-alerts/assets/pwcph_tax-alert-34.pdf

BM, GM News. (Dec. 14,2017). “What’s in TRAIN, the newly ratified tax reform program”. Retrieved from
http://www.gmanetwork.com/news/news/specialreports/636590/what-rsquo-s-in-train-the-
newly-ratified-tax-reform-program/story/

Gialogo, Edward. (January 4,2018). “[OPINION] Train law: What does it change?”. Retrieved from
https://www.rappler.com/thought-leaders/192873-train-tax-reform-law-what-does-it-
change-explainer

Tomacruz, Sofia. (December 13,2017). “EXPLAINER: What's inside the bicam-approved tax reform bill?”.
Retrieved from https://www.rappler.com/newsbreak/iq/191278-explainer-train-bill-
philippines

Philippine Daily Inquirer. (July 28,2017). “TRAIN is intended to correct a bad tax system”. Retrieved from
http://opinion.inquirer.net/105879/train-intended-correct-bad-tax-system

IBON foundation. (December 1, 2017). “Four indicators that Duterte’s tax program is anti-poor”. Retrieved
from http://ibon.org/2017/12/four-indicators-that-dutertes-tax-program-is-anti-poor/.

Nonato, Vince (December 18, 2017). “Tax reform to trigger price shock, warns Zarate”. Retrieved from
http://newsinfo.inquirer.net/953436/philippine-news-updates-president-duterte-price-
shock-bayan-muna-rep-carlos-isagani-zarate-tax-reform-for-acceleration-and-inclusion

Cu, Rea (November 29,2017). “Car excise tax seen in place by 2018”. Retrieved from
https://businessmirror.com.ph/car-excise-tax-seen-in-place-by-2018/

Punongbayan, JC (April 1 2017). “Will tax reform really hurt the poor?” Retrieved from
https://www.rappler.com/thought-leaders/165775-tax-reform-hurt-poor

Abrea, Mon (February 26,2017) “#AskTheTaxWhiz: Is the proposed tax reform package really pro-poor?”.
Retrieved from https://www.rappler.com/business/162598-askthetaxwhiz-proposed-tax-
reform-package