THE proposed Tax Reform for Acceleration and Inclusion Act, the government’s centerpiece tax reform package recently passed by the House of Representatives, “is the most egalitarian legislation the country will have in 70 years,” according to Albay Rep. Joey Sarte Salceda, a noted economist.
The measure, contained in House Bill 5636, is projected to deliver a P354-billion impact annually, P170 billion of which represents direct transfer of funds from the elite to middle income and poorest households.
TRAIN seeks to overhaul the country’s personal income tax system, expand the value-added tax base, ensure bigger internal revenue allotments to local governments to enhance their development capabilities, and resolve the income inequality between the poor and the wealthy.
“Nowhere in the past 70 years, or since the country’s First Congress was convened in 1945, could we find a legislation as egalitarian as TRAIN, which delivers such huge monetary impact to address the gross inequality between the elite and marginalized Filipinos,” Salceda stressed.
It is considered the most ambitious and significant reform initiative by the administration of President Rodrigo Duterte, who certified the bill as urgent.
The House overwhelmingly approved the measure with a 246-9 vote with one abstention last May 31. The Senate will tackle it when Congress resumes session later this month. Its lead proponents expect the bicameral committee to eventually enact it by September.
HB 5636 consolidated Salceda’s original HB 4688, Quirino Rep. Dakila Carlo Cua’s HB 4774, and several other proposals. It adopted the title and most provisions of Salceda’s bill, including the conditional cash transfer system, and the proposals of the Department of Finance.
Cua and Salceda are chairman and vice chairman, respectively, of the House Ways and Means Committee.
Government information teams coordinated by the DoF have been fielded to engage various sectors and ensure proper and accurate understanding of the measure and its value.
Some 107 such meetings have been held, mostly with transport groups, civil society organizations, people’s organizations, youth groups, and local government units around the country.
Salceda, who actively participates in the meetings, said he has answered and explained the most asked questions about the measure.
TRAIN will overhaul the country’s personal income tax system once enacted into law. Effective 2018 to 2020, taxpayers earning up to P250,000 a year will be tax-exempt while those earning up to P400,000 will pay a 20-percent tax on the excess over P250,000.
People earning up to P800,000 will be taxed P30,000 plus 25 percent in excess of P400,000. Those earning up to P2 million will pay P130,000 plus 30 percent of the amount in excess of P800,000. Those earning up to P5 million will pay P490,000 plus 32 percent in excess of P2 million, while those earning over P5 million will be taxed P1.45 million plus 35 percent in excess of P5 million.
Slight adjustments will be effected by 2021 onwards, with reduced percentage on earnings beyond the set income brackets by those earning up to P250,000 a year will remain tax exempt.
“TRAIN is the only tool that could make our tax system more efficient, equitable and pro-poor, since the government cannot exclusively tax the rich because such measure would immediately be struck down as class legislation,” Salceda emphasized.
The measure also increases excise taxes on oil and vehicles, expands the value-added tax (VAT) base, and taxes sweetened beverage and lotto winnings, but retains VAT exemptions for senior citizens and disabled persons, and transactions by various cooperatives.
Aside from the poor, local government units will likewise directly benefit from TRAIN, as 40 percent of their revenues will go to the Internal Revenue Allotments of barangays, towns, cities, provinces and the Autonomous Region of Muslim Mindanao.
TRAIN is expected to hike tax revenues that will fund government’s massive development programs and generate inclusive economic growth that will ultimately benefit the poorest families. It is projected to ultimately reduce poverty to single digit percentage, grow the economy and transform the Philippines into an Asian economic powerhouse by 2028, with a $1.2-trillion Gross Domestic Product.
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