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Name: Michaela Ashley T.

Reyes Date:
Course/Section: ABFS 301 Professor: Jumel G. Estrañero
Subject: International Political Economy

Political Economy and It's Relation to the Train Law


In the Philippines
I. Introduction
The Train Law, Republic Act No.10963, also known as the Tax Reform for Acceleration
and Inclusion (TRAIN) is one of Duterte’s promise during his presidential election, it is the
first package of the comprehensive tax reform program. The TRAIN Act seeks to correct
the shortcomings of the old Tax system to make it more simpler and fair. The first package
which seeks to lower personal income taxes, broaden the value added tax (VAT) base, adjust the
excise taxes on petroleum and automobiles, and reduce the rates of estate and donor’s tax. The
good thing about the Tax Reform is that, it will lessen the overall tax of the poor and the
middle class and will exempt those whose salary grade is 250,000 per year below. The
exemptions, deductions, rebates and relief have been provided by the legislature to
achieve certain social and economic goals and to encourage savings and investments for
the economic development of the country. The downside of the TRAIN act is that it will
increase the excise tax on automobiles, fuel, and sweetened beverages. TRAIN aims
reduce poverty rate from 22% to 14% uplifting poverty and to graduate to upper middle-
income country status from low middle-income country status.
Taxes are mandatory contributions of everyone to raise fund for nation building. The
government collects taxes to provide basic services, Direct or indirectly taxes are paid by
everyone.
The debate today is whether the tax reform will really help raise the economy or will it
only give heavier burden to its citizens.
The implementation of, the tax reform faced different opinions from individuals, there is a
great deal of dismay encompassing the tax reform, numerous individuals are hesitant
about the different effects that it might bring. Majority of the public has been feeling the
weight of price increase, some say that the burden of this is bound to become heavier.

https://www.youtube.com/watch?v=aAedUqv2Y3M
http://newsinfo.inquirer.net/957055/old-tax-rates-will-still-apply-for-personal-income-in-2017
II. A. Statement of the Problem
This study was conducted to understand the changes brought about by the
implementation of the Train Law and how it will affect the Filipino people.

1. What are the primary targets of the TRAIN Act?


2. Will the Train Law enhance the lives of the Filipinos or will it provide additional
burden to its people?

B. Methodology
During the Marcos Regime, our government was in a fiscal crisis, the system of taxation
was unresponsive, it was unnecessarily complicated, and very difficult to administer.
Despite successive laws increasing taxes, actual revenues decreased, while the main
burden of taxation fell on those least able to support it — the low and middle-income
classes rather than the rich. And of the rich, those hardest hit were the most productive;
for the tax system was a major disincentive to private enterprise, hence change was not
optional, it was a necessity. The state has a significant role to play in creating the
conditions for sustained development not just through the provision of infrastructure and
basic services but by establishing entitlements that allow all citizens, especially the poor,
to develop their capabilities. The state, therefore, must be able to raise revenues and
spend these in ways that promote the people's well‐being. In that case the TRAIN Act is
exceptional since it doesn’t only seek to not only address our tax system by making it
progressive but is also helping in making commitments additional revenue for
infrastructure, education and health
The Tax Reform for Acceleration and Inclusion is a compelling vision for the Philippines,
aiming to boost the country’s economy and move from being a low-income country status
to a middle-income country status. The tax reform will really help the Filipino people since
the government will be lowering the personal income tax (PIT) of the individuals except
the riches. Being free from tax is a huge help to those Filipinos who earns PHP 250,000
every year.
But in every good thing there is always a downside, the exemptions and deductions of
tax will also mean that there will be billions of revenues lost from the lowering of the
personal income tax and to compensate for this loss there would be excise tax on
sweetened beverages, and higher taxes on automobile, petroleum and tobacco. In
general, the tax reform is simply utilitarian in nature meaning there will be a need for a
little compromise for the benefit of the majority. Therefore, other than its propitious effects
there will also be sacrifices that needs to be considered. Aside from the exemption and
deduction of tax, ten million poorest households will get a P200 monthly as an aid to those
https://www.youtube.com/watch?v=aAedUqv2Y3M
http://newsinfo.inquirer.net/957055/old-tax-rates-will-still-apply-for-personal-income-in-2017
in need. One example of the probable problem that tax reform will bring is with drivers,
drivers will be gravely affected by the excise tax on petroleum since they will be burdened
as well. In there every day lives gasoline keeps their routine on track, product deliveries,
public transportations, people who drive motorcycles who go to work.

III. Review of Related Literature


According to Antoinette Temanil, Aldrin Jose Cana, Lorenzo Delgado, if we lower
our corporate and individual income tax rate, it would make our country more
competitive not only in the ASEAN but also with our Asian neighbors because
investors would no longer have the fear that they might just suffer huge losses from
their investments long before they could reach the payback period for their capital
investments because of high taxes. More investments would create more jobs
reducing unemployment rate.

Bayan Muna Rep. Carlos Isagani Zarate said the excise tax on oil products would
cause a “severe domino effect” on the prices of other products and services. The
“price shock” will hit the poor the hardest considering that they do not
have a higher take-home pay [as a result of the tax exemption from] the
TRAIN Act but have to shell out more money due to it,” Zarate said in a
statement.

To cushion the impact of indirect taxes, there is cash transfer provided in the law
itself. Ten million households will receive cash transfer of P200 per month in 2018
and P300 per month in 2019 and 2020. (presidential spokesperson Harry Roque)
this will be a good assistance for the inflation of the tax especially on those who
are gravely affected.

According to Bayan Muna Rep. Carlos Zarate,” despite income tax exemptions,
fringe benefits will be taxed, and consumers will have to shoulder taxes on fuel,
sugary beverages, and property.” The objections raised by the Makabayan
lawmakers on the tax reform such as the excise taxes on fuel will be discussed in
another post.
IV. Presentation, Interpretation, & Analysis

Old Tax System

Not over P10,000 5%

Over P10,000 but not over P30,000 P500 + 10% of the excess over
P10,000
Over P30,000 but not over P70,000 P2,500 + 15% of the excess over
P30,000
Over P70,000 but not over P8,500 + 20% of the excess over
P140,000 70,000
Over P140,000 but not over P22,000 + 25% of the excess over
P250,000 P140,000
Over P250,000 but not over P50,000 + 30% of the excess over
P500,000 P250,00
Over P500,000 125,000 + 32% of the excess over
500,000

New Personal Income Tax rate


(2018-2020)
Annual Income Tax rate

P250,000 and below None 0%

P250,000 to 400,000 20% of excess over 250,000

P400,000 to 800,000 P30,000 + 25% of excess over


400,000
P800,000 to 2,000,000 P130,000 + 30% of excess over
800,000
P2,000,000 to 8,000,000 P490,000 + 32% of excess over
2,000,000
Above P8,000,000 P2.41 million + 35% of excess over
P8 million

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The law lowers the personal income tax of salary earners but raises the excise
tax on a host of goods and services, including fuel, cars, tobacco, coal, oil
products and cosmetic procedures.

Exempt from Value added Tax

Importation of instruments, implements belonging to persons coming


to settle in the Philippines.
Services by agricultural contract growers.

Medical, dental, hospital and veterinary services.

Educational services accredited by DEPED, CHED

Services rendered by regional or area HQ established in the


Philippines

Excise tax on Petroleum products

January 2018 P3.00/Liter

January 2019 P5.00/Liter

January 2020 P6.00/Liter

The tax on regular unleaded and premium gasoline will be raised to P7 per liter in 2018,
P9 per liter in 2019, and P10 per liter in 2020. Diesel and bunker fuel shall be taxed
P2.50 per liter this year, P4.50 in 2019, and P6 in 2020. The tax on petroleum gas shall
be increased by P1 every year from 2018 to 2020.
Excise Tax on Automobiles

Up to P600,000 3%
Over P600,00 to P1.1Million P18,000 + 30% of value in excess of
600,000
Over P1.1 Million to P2.1Million P168,000 + 50% of value in excess of
1 Million
Over P2.1 Million to P3.1 Million P668,000 + 80% of excess value in
excess of P2.1 million
Over P3.1 Million P1,460,000 +90% of value in excess of
3.1 million

TRAIN simplifies the excise tax on automobiles, but lower-priced cars continue
to be taxed at lower rates while more expensive cars are taxed at higher
rates. This excise will raise revenue in a very progressive manner as the richer
buyers tend to own more and expensive cars compared to those who earn less

Sugar Sweetened beverage


Current Price P49.00

New price ( with excise tax) P64.00

(1.5L softdrinks)
Excise tax of P10 on beverage will be adjusted sweetened beverages every year.

The tax reform agenda proposed by the Department of Finance (DOF) is


designated to shift the tax burden from the lower 99 percent of the community
to the wealthiest 1 percent,” DOF presented the “Tax Reform for Acceleration
and Inclusion- Revised package 1. According to the DOF, doing “tax reform
need not be burdensome because we can do it in the most simple, fair and
efficient manner so that we end up with a tax system where the rich will
contribute more and the poor will benefit from more and better services.”

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V. Summary, Conclusion, & Recommendation
The Tax Reform for Acceleration and Inclusion (TRAIN) is the first package of the
comprehensive tax reform program (CTRP) envisioned by President Duterte’s
administration, which seeks to to correct a number of deficiencies in the tax system
to make it simpler, fairer, and more efficient. It also includes mitigating measures
that are designed to redistribute some of the gains to the poor.

Through TRAIN, every Filipino contributes in funding more infrastructure and social
services to eradicate extreme poverty and reduce inequality towards prosperity for
all. TRAIN addresses several weaknesses of the current tax system by lowering
and simplifying personal income taxes, simplifying estate and donor’s taxes,
expanding the value-added tax (VAT) base, adjusting oil and automobile excise
taxes, and introducing excise tax on sugar-sweetened beverages.

Therefore, I conclude that the tax reform for acceleration and inclusion is a good
start for our country, it is a very good step towards moving to a better economic
status. There are lots of sacrifices that our people would be facing but giving these
up will make a better life for everyone.

VI. Reference
http://www.dof.gov.ph/taxreform/
http://newsinfo.inquirer.net/957055/old-tax-rates-will-still-apply-for-personal-
income-in-2017
https://www.youtube.com/watch?v=aAedUqv2Y3M
http://newsinfo.inquirer.net/957055/old-tax-rates-will-still-apply-for-personal-income-
in-2017
http://www.sanbeda-
alabang.edu.ph/bede/images/researchpublication/BedanReview/7._Tax_Refor
m_Creating_Real_Changes_in_Society_through_the_Destructive_Power_of_T
axation_-_Bedan_Review_Vol._V.pdf
https://blogwatch.tv/2017/07/4-examples-impact-tax-reform-taxpayers-
personal-income/
https://www.dof.gov.ph/taxreform/index.php/2018/01/23/10-m-poor-
households-benefit-train/
https://www.dof.gov.ph/taxreform/index.php/2018/01/23/10-m-poor-
households-benefit-train/
https://www.pinoymoneytalk.com/dof-tax-reform-package-may-2017/
https://pcoo.gov.ph/wp-content/uploads/2018/01/A-Guide-To-TRAIN-
RA10963.pdf

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