A REACTION PAPER REGARDING RA 10963 (TRAIN LAW)

On December 19, 2017, President Rodrigo Roa Duterte signed the Tax Reform for
Acceleration and Inclusion (TRAIN LAW) as Republic Act (RA) no. 10963 which the first
package of the Comprehensive Tax Reform Program (CTRP). This was effective beginning
January 1, 2018, and was said to create a simpler, unbiased, more effective, and just system of
tax collection since it was supposed to have the rich pay bigger contribution which means that
the poor will benefit more by paying less. This will also result in more revenues that the
government can use to fund the President’s “Build, Build, Build” Program which will lead to our
country’s economic growth.

However, Train Law also comes with a lot of drawbacks. Starting with the question “Is
this law really for the poorest of the poor or the richest of rich.” The Train Law was said to be an
effective tool for the government to level the incomes of the rich and the poor since the top
marginal tax rate will be higher for the rich with taxable income above ₱8 million. It was also
suggested that the tax liability of 99% of Filipino tax filers will be reduced since the highest
marginal tax rate of 32% will fall to 25%. Moreover, the first ₱250,000 of annual taxable income
will be exempted from income tax.

Although it sounds promising, the truth is that the higher top marginal tax rate only
affects the richest Filipinos whose earning ₱12 million or more per year. In an interview, Ibon
Foundation Executive Director Sonny Africa said that “The reality of Train is it gives income tax
benefits maybe, at most, from six to seven million Filipinos but imposes taxes on all 23 million
Filipino families. That means the poorest 15 million families that have no income tax benefits
will pay higher taxes.” [1] His statement was true considering that not all Filipinos have
benefited from the income tax exemption but all Filipinos were affected by the increase in excise
tax.
 Moreover, some claim that Train’s excise taxes were designed to favor the rich.
According to an article published by Rappler way back December 28, 2017, entitled “How
lawmakers gifted themselves with tax cuts on luxury cars” [2], the excise tax on automobiles
now declines with the selling price of a car which means that only the rich who can afford luxury
cars are the ones who can benefit from this.

On a different perspective, we can view the Train Law as an anti-inflationary solution in

the medium to long term period since this will reduce the transport cost of goods and services
with the upgraded infrastructures. Like what I’ve said at the beginning of this paper, Train Law
can help the government in improving and upgrading infrastructures since it is a way to generate
more funds to fuel the “Build, Build, Build” Project of our president. As what the DOE Secretary
Alfonso Cusi said in an interview, “We might have to spend a little more, but that little sacrifice
would translate to huge benefits for the country.” [3]

Overall, the Train Law may not be a perfect law, but looking at the long run, it is a big
plus for our economy. Not everyone may be affected on the same scale but everyone will benefit
from it a few years from now.

Sources cited:

1. https://business.inquirer.net/243644/economic-expert-warns-train-can-deliver-negative-
effects-economy-train-tax-reform-ibon-foundation-africa-dof-
economics#ixzz6X1S1TdTJ
2. https://rappler.com/voices/thought-leaders/jc-punongbayan-lawmakers-gifted-
themselves-tax-cuts-luxury-cars?fbclid=IwAR2mVFyYs-P4uaTv_9ScClNKAl72wJX-
rAVyYqvGIJUhTS-eJPtOWX7Md7I
3. https://www.topgear.com.ph/news/industry-news/doe-train-costs-a962-20190107