The lowering of personal income tax (PIT) rates under the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) are in sync with the practices of other countries in the Association of Southeast Asian Nations (ASEAN), according to the National Tax Research Center (NTRC).
NTRC Executive Director Trinidad Rodriguez said the TRAIN, which exempts those earning a taxable income of P250,000 and below from paying the PIT, is along the same thresholds set by other economies in the region such as Malaysia, Singapore, and Thailand.
Rodriguez said Singapore, for instance, sets a tax-exempt threshold of 20,000 Singapore dollars, which is equivalent to P738,000, while Thailand’s threshold is 150,000 baht, or around P228,000.
In Malaysia, the threshold is 5,000 ringgits or P60,000; for Cambodia, 150,000 riels or P82,188; Laos, 12 million kips or P74,400; Myanmar, 2 million kyat or P76,000, Rodriguez said.
According to the Department of Finance (DOF), the proposed PIT cuts in the TRAIN will exempt some 83 percent of taxpayers from income taxation, giving them the much-needed relief after 20 years of non-adjustment of the tax system.
It will actually benefit 99 percent of families/households because of the hefty PIT cuts for salaried workers and the unconditional cash transfers for the poorest families, said the DOF.
“The minimum wage in these respective countries are well covered by the exemption, by the exempt threshold, similar to us. That’s on the PIT schedule,” NTRC’s Rodriguez said during one of the earlier hearings held on the TRAIN by the Senate ways and means committee chaired by Sen. Juan Edgardo Angara.
The Senate ways and means committee began the deliberations on the TRAIN, which was filed in the chamber by Senate President Aquilino Pimentel III as Senate Bill (SB) No. 1408, last March 22.
The Senate began conducting plenary debates on the revised measure, SB 1592, on Nov. 22 and finally approved it with substantial amendments last Nov. 28.
Meanwhile, House Bill (HB) No. 5636, is the TRAIN version approved by the House of Representatives last May 31.
The bicameral conference committee tasked to reconcile the conflicting versions of the House and Senate versions of the TRAIN began its meeting last Dec. 1. It is expected to wrap up its final report this month.
Finance Secretary Carlos Dominguez III has expressed hopes that the bicameral conference committee could submit its final reconciled version of the TRAIN to Malacanang by the second week of December so that President Duterte could sign it into law before the Christmas holidays, in time for its publication before the end of the year and its effectivity by Jan. 1.
The first package of the Duterte administration’s tax reform program—TRAIN—aims to lower personal income tax rates while, at the same time, widening the base for the value-added tax and adjusting excise tax rates for fuel and automobiles, among other reform measures.
Under the Senate-approved SB 1592, the first P250,000 annual taxable income will be exempted from tax, plus the P82,000 tax exemption for 13th month pay and other bonuses. This translates into an approximate tax-free monthly income of P21,000.
DOF calculations also show that even with the slightly higher expenses that taxpayers would incur under the TRAIN’s revenue-enhancing provisions, the increases in their take home pay would more than offset these would-be additional costs.