Introduction

In an era where financial austerity is given an utmost importance, topics on tax reform
had once become a center of discussion in the Philippines, leading to the birth of the Republic
Act No. 10963, otherwise known as Tax Reform for Acceleration and Inclusion (TRAIN) Law.
The TRAIN Law is the first package of the Comprehensive Tax Reform Program which started
in Department of Finance, ratified by the Congress, and was signed into law by President
Rodrigo Duterte on December 19, 2017. The law took effect on January 1, 2018 with the goal
addressing a few inadequacies in the duty framework by providing hefty income tax cuts for the
majority of Filipino taxpayers, hence making it less stressful, more attractive, and increasingly
useful to support the government's plan on raising the bulk of needed funds to help support the
government’s accelerated spending on its “Build, Build, Build” and social services programs
(Department of Finance, 2017).

The TRAIN LAW works by providing an increase in the take-home pay of salaried
Filipino by reducing income tax rate while increasing and rationalizing tax rates in other goods
and services. Under the said law, income taxpayers who earn approximately P22, 000 and below
per month are now exempted from income tax payment. These employees will be able to receive
their salary without any deductions because of tax. Moreover, Presidential Spokesperson Harry
Roque said the law also simplified taxes for small taxpayers, including self-employed
professionals, with the payment of a flat tax of 8 percent on gross sales or receipts instead of
income and percentage taxes which are filed once a year. Based on the foregoing, it can be
inferred that the TRAIN Law is indeed pro-poor. However, since its implementation in 2018,
much opposition came out. According to Layug (2018), a lot of sectors believed that it caused a
‘burden’ to poor people. Critics point out that even if the law promised to let marginal earners
and minimum salaried workers for smaller tax or even tax exemption, this may cause a windfall
to the basic commodities that the society had normally consume everyday in the form of higher
consumption taxes (increased in price tags) that are out of reach and beyond the capability of the
poor families. Consumption taxes, in the form of higher excise tax on tobacco products,
petroleum products, automobiles, tobacco, and additional excise tax on sweetened beverages and
non-essential, invasive cosmetic procedures were introduced. It also expanded the VAT base by
repealing exemption provisions in numerous special laws. In its first year of implementation, the
Philippine Statistics Authority (PSA) reported that the bottom 30% households surged to 4.80%
in 2018, from 3.60% in 2017. This was higher than the headline inflation of 3.95% in
January and beyond the government's target of between 2% and 4%.