The Tax Reform for Acceleration and Inclusion Act has had its wheels in motion for six months now. The TRAIN law’s benefits such as lower income taxes and additional funding for the government’s Build, Build, Build program are diluted by rising inflation rates, at a new five-year high record of 4.6 percent this May, and higher prices of commodities.
Given the present economic conditions in the country, it is difficult for the government to rely on the consumption practices of the Filipinos as a revenue stream. The new tax reform law has good intentions, but the changes in revenue sources, from income to consumption, threatens the government’s fiscal capacity to implement its projects.
The projected revenue deficit is aimed to be alleviated by the proposed second package of the TRAIN law. The second package of the TRAIN law shall reform the corporate income tax and investment incentives systems. It aims to gradually decrease the country’s corporate income tax, which is deemed highest in Asia, to 25 percent, making it comparable with other Asean countries and therefore more attractive to foreign investors. The second TRAIN law will systematize the complex tax incentive system, and limit and remove some tax incentives and exemptions to certain industries making such incentives “transparent, targeted, time-bound and performance-based.”
As I have said in the past, I urge our fiscal managers to uphold revenue-neutral policies that will maintain tax revenues. The Bureau of Internal Revenue and Bureau of Customs have reported increased revenue collections for the past years. If the targeted revenue collections have been met, why is there a need to look for additional funds? In the event that the proposed revenue targets do not meet the cost of the Build, Build, Build program, it would be advisable to just borrow money to finance the projects instead of putting the burden on the consumers. Once the infrastructure projects of the government have been put in place, the economic conditions of the country will certainly improve. The improved and stable economy will yield better tax revenues and hence, there will be enough funds to pay for the said loans.
The second package of the TRAIN law shall be deliberated in the coming Third Session of the 17th Congress. While we wait for the second TRAIN to come, I repeat my call to my colleagues in Congress to study other measures that will minimize the burden to the grassroots. We have other laws which are designed to increase and improve revenue collection such as the Lateral Attrition Law which reward government agencies performing efficiently and penalize those who are underperforming. These are good laws, but these become futile because of the poor implementation of government agencies. Hence, I encourage also government agencies to review the implementation of existing laws before we legislate new laws that tackle the same problem. The second TRAIN is coming, but we must ensure that the tracks are well-paved before we let this TRAIN law be passed.