Filipino consumers now have a combined P10 billion cash bonanza to spend more each month following the implementation starting last January of the Tax Reform for Acceleration and Inclusion Act (TRAIN), which slashed personal income tax (PIT) rates for 99 percent of taxpayers.  

Finance Secretary Carlos Dominguez III said P10 billion of additional purchasing power for consumers will further stimulate the domestic economy, which is now among the fastest-growing in the region. 

“Our estimate is P10 billion a month in the reduction in collections from the withholding tax,” Dominguez said. “So that means to say people are going to have P10 billion a month more to spend.”

The TRAIN, the first package under the Duterte administration’s Comprehensive Tax Reform Program (CTRP), exempts those earning an annual taxable income of P250,000 and below from paying the PIT, benefiting over six million compensation earners.  

The 13th month pay and other bonuses not exceeding a total of P90,000 are also tax exempt under TRAIN. 

“In effect, those with a taxable annual income of P250,000, on average, would be able to take home a cash bonanza equivalent to a substantial one-month’s pay per year,” Dominguez said. 

For those earning P250,000 and above, the tax brackets have also been adjusted so that those with taxable income of more than P250,00 but not above P2 million pay only between 20 and 30 percent PIT. 

Only the ultra-rich, or those earning P8 million and above, which comprise less than one percent of the individual taxpayer base, are taxed 35 percent. 

From 2023 onwards, the PIT rates of individuals will further be adjusted downwards so that those earning above P250,000 but not more than P2 million would pay only between 15 percent and 25 percent in income tax. 

To offset the loss from PIT collections, this tax reform law contains revenue-enhancing measures that aim to support the government’s unprecedented spending on infrastructure and human capital development. 

These include the removal of certain exemptions to the value-added tax (VAT); adjusted tax rates for fuel, automobiles, tobacco, coal, minerals, documentary stamps, foreign currency deposit units, capital gains for stocks not in the stock exchange, and stock transactions; and new taxes for sugar-sweetened beverages (SSBs) and non-essential cosmetic procedures. 

The TRAIN also introduced cuts in the estate and donor’s taxes. 

Undersecretary Antonette Tionko, who heads the Revenue Operations Group of the Department of Finance (DOF), said the Bureau of Internal Revenue (BIR) has yet to collate the data on the net amount of tax collections raised from these revenue-enhancing measures given that the agency has yet to come up with the complete data on the withholding tax for PIT. 

“Maybe after the first quarter,” Tionko said in response to queries on when the government can compute the net revenues from the TRAIN. 

With TRAIN,  a call center agent earning P21,000 a month with, say, two dependents, will get to take home the P22,590 he or she used to pay in taxes, or slightly more than a month’s pay because of the tax exemption provision under this tax reform law. This means an effective increase in pay of P1,882 per month. 

Even if one adds the impact of the TRAIN’s revenue-enhancing provisions, he or she still gets to take home a net of P1,700 a month on average. 

Meanwhile, a family of 4, with the father working as an administration manager who earns P25,000 a month and the mother employed  as an operations manager and receives a monthly pay of P70,000, will effectively be able to get an additional  P8,532 per month combined under the lower PIT of TRAIN. 

Even with the TRAIN’s revenue-enhancing provisions, which the DOF estimates would amount to about P1,393 a month, this family with a working couple will be able to save around P7,139 of their TRAIN-effected pay increase.

Dominguez said the implementation of the TRAIN is the first time that the government had pushed a tax reform package not in response to a financial crisis or on external conditions imposed by other institutions, but to instead strengthen socioeconomic programs meant to attack poverty and correct income inequality. 

It’s also the first time ever that the government, through the initiative of President Duterte, has lowered PIT rates to make income taxation more equitable and fair, most especially for low-income Filipinos, he said. 

Non-taxpayers also benefit from the TRAIN by way of unconditional cash transfers (UCTs) and other social mitigation programs as provided under this law.  

UCTs amounting to P2,400 for 2018 will be distributed within the first quarter to  some 7 million households, comprising the 4.4 million existing beneficiaries under the Pantawid Pamilyang Pilipino Program (4Ps) and 3 million  indigent senior citizens already receiving social pensions, Finance Undersecretary Karl Kendrick Chua said. 

He said these UCTs of P200 a month or a total of P2,400 this year will be increased to P300 a month or a total of P3600 a year in 2019 and 2020. 

Under the TRAIN, up to 30 percent of the incremental revenues from this law is earmarked for social mitigation measures, while 70 percent will help support the government’s “Build, Build, Build” infrastructure program.

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