The Three Goals of Taxation:

This article explained the three goals of taxation in the following manner. First, for revenue, it
explains why for countries, both income and consumption taxes are needed to support the social
safety net. Second, the redistributive function, properly seen as redistributing unconsumed
wealth, explains why the United States adopted the income tax and why even developing
countries insist on retaining an income tax. And lastly, the regulatory function explains the
political resiliency of the income tax, since only by taxing savings can politicians regulate
savings and investment behavior.

R.A 10963 Sec 5 amended Sec 24 of the NIRC with regard to income taxes. Applying those
functions or goals as mentioned above, our Tax Reform for Acceleration and Inclusion Act
(TRAIN LAW) has achieved these goals namely, lowering the personal income tax and higher
consumption tax. Under Train, it lowered and simplified personal income taxes that those
income below 250,000 pesos are now exempt from paying personal income tax, while the rest of
taxpayers, except the richest, will see lower tax rates ranging from 15 percent to 30 percent by
2023. To maintain progressivity, the top individual taxpayers whose annual taxable income
exceeds 8 Million Pesos face a hinger tax rate of 35 percent from the current 32 percent. This
allows the enforcement of proportional distribution and promoting the general welfare.

The TRAIN Law also increases the authority of the Commissioner to audit and examine books of
tax payers notwithstanding any law requiring the prior authorization of any government agency
as provided under Sec. 3 of R.A 10963 amending Sec. 5 of the NIRC Code of 1997. This
amendment gives more power to the government as an implement of police power to assure the
collection of taxes from the taxpayers even though it usurps the authority of an agency as
provided by law. This will make the collection of taxes even more favorable to government by
not making it complicated and in a more expeditious manner. This is in line that taxes are the life
blood of the government which is indispensable and inevitable price for civilized society. Thus,
the collection of taxes must be without hindrance if the State is to maintain its orderly existence.

The TRAIN law is also aimed to generate revenue through higher consumption tax by imposing
higher excise tax on tobacco products, petroleum products, automobiles, on sweetened beverages
and non-essential invasive cosmetic procedures as provided under Sec. 42, 43, 44, 44 and 46 of
R.A. No. 10963. The TRAIN Law adjusted the oil excise tax wherein there was a staggered
increase of oil excise tax by up to 6 pesos per liter over a three-year period, with lower rates for
essentials as diesel, kerosene and LPG to protect households and commuters. This causes PUV
operators and drivers to avail for social assistance program. Also, the TRAIN adjusted the
automobile excise tax, which increase the rate to be taxed depending on the value of the
automobile. For sweetened beverages, it introduced and excise tax for 6 pesos per liter for drinks
containing caloric or non-caloric sweetener and 12 pesos per liter for drinks containing high
fructose corn syrup or combination. 3-in-one coffee and milk among others, are exempt. This
type of adjustment was used as an implement of the police power of the State with the end view
of generating revenue and regulation to a particular activity and item. This can help the
consumers that commodities which are classified as the basic needs of humankind should be
prioritize and those which are not cost more because of the imposition of a higher tax rate. Are
TRAIN Law give us the realization that what makes you happy can hurt you more.
The TRAIN Law also limits VAT exemption while dealing with fiscal dilemma to achieve the
reduction of expenditures, increase borrowing and increase government’s revenue through
taxation as provided under Sec. 24 of R.A. No. 10963. This is in accordance to the goal of
taxation on redistributive function. Because those earning less are given the opportunity to retain
as much as they earn and this makes the rich people to give more of their income or wealth to the
circulate in the economy. This also allows the redistribution of wealth making in not making the
poor, poorer and the rich, richer. The present tax system has adopted the progressive system of
taxation which aims at reducing the inequality in the distribution of wealth by preventing its
undue concentration in the hands of a few individuals.

Having been said, the goals enumerated in the article have been met in the passage of some of
the provisions of the TRAIN Law.

Sources:

www.taxreform.dof.gov.ph – Package 1: TRAIN | Comprehensive Tax Reform Program

www.deped.gov.ph – Affirming the Importance of the Tax Reform for Acceleration and
Inclusion

www.lawphil.net – R.A. No. 10963

Submitted by:

Mendoza, Joven A. – 2018400124

Tax 1 – 3S – Atty. Deborah S. Acosta - Cajustin