Institute progressive tax reform and more

effective tax collection, indexing taxes to

inflation. A tax reform package will be
submitted to Congress by September 2016.

1
Objectives:
• Discuss the proposed income tax
rate.
• Understand the proposed estate and
donor’s tax rate.
• Know the exemptions of Value
Added Tax system.
• Discuss the increased tax rate of
fuel, automobiles and sugar-
sweetened beverages. 2
Introduction
The TRAIN (Tax Reform for Acceleration and
InclusioN) Law changes the amount collected on
personal income as well as the consumed products
and services in the country. This is to create a
simpler, fair and more efficient system, where the
rich will have a bigger contribution and the poor
will benefit more from the governments programs
and services. Its primary goal also is to generate
enough revenue for the Duterte’s government’s
infrastructure programs and other services.

3
What is tax?
Tax is a compulsory contribution to state revenue,
levied by the government on workers' income and
business profits or added to the cost of some goods,
services, and transactions. (Oxford English
Dictionary)

4
 GOODS SERVICES
TAX

REDISTRIBUTION REPRICING
INCOME

5
What is progressive tax?
A progressive tax is a tax that imposes a
lower tax rate on low-income earners
compared to those with a higher
income, making it based on
the taxpayer’s ability to pay.
(www.investopedia.com)

> > 6
What is inflation rate?
Itrefers to the measure or rate by which
the cost of goods and services rises and
purchasing power declines. As prices
increase, monetary value decreases.

https://www.crestcapital.com7
What is TRAIN?
The Tax Reform for Acceleration and
Inclusion (TRAIN) Act, officially cited
as Republic Act No. 10963, is the initial
package of the Comprehensive Tax Reform
Program (CTRP) signed into law by
President Rodrigo Duterte on December 19,
2017.[

www.wikipedia.org
8
TRAIN consists of revisions to the
National Internal Revenue Code of
1997, or the Tax Code. This reform
includes packages that make changes in
taxation concerning the personal income
tax (PIT), estate tax, donor's tax, value
added tax (VAT), documentary stamp
tax (DST) and the excise tax of
petroleum products, automobiles,
sweetened beverages, cosmetic
procedures, coal, mining and tobacco.
www.wikipedia.org
9
 Tax Reform for Acceleration
and Inclusion
 Lowering the Personal Income Tax (PIT)
 Simplifying Estate and Donor's Tax
 Simplified Value-Added Tax (VAT) system
 Increasing the Excise Tax of Petroleum
Products
 Increasing the Excise tax of Automobiles
 Increasing the Excise Tax on Sweetened
Beverages

10
 Lowering the Personal Income Tax (PIT)

 TRAIN lowers personal income tax (PIT) for

all taxpayers except the richest. Under TRAIN,
those with annual taxable income below
P250,000 are exempt from paying PIT, while
the rest of taxpayers, except the richest, will see
lower tax rates ranging from 15% to 30% by
2023.

http://www.dof.gov.ph/taxreform
11
Annual Income Bracket Tax Rate

₱0 to ₱250,000 0%

₱250,001 to ₱400,000 20% of the excess over ₱250,000

₱400,001 to ₱800,000 ₱30,000 + 25% of the excess

over ₱400,000

₱800,001 to ₱2,000,000 ₱130,000 + 30% of the excess

over ₱800,000

₱2,000,001 to ₱5,000,000 ₱490,000 + 32% of the excess

over ₱2,000,000

₱5,000,001 and above ₱1,450,000 + 35% of the excess

over ₱5,000,000 12
Sample computation:
Annual income of ₱450,000.00
Base tax ₱30,000

Excess of the base annual ₱50,000

salary (₱450,000 – ₱400,000)
25% of excess (₱50,000 x ₱12,500
25%)

Tax computation
    ₱30,000 (base tax)
+ ₱12,500 (25% of the excess)
 = ₱42,500 Total annual tax
13
 Before the tax reform 2018 to 2019

₱90,972 annual tax ₱42,500 annual tax

previous
or ₱7,581 per month or ₱3,541.66 per
month 

According to the DOF, 83% of the working-class Filipinos

belong to the ₱0 to ₱250,000 income bracket. This means
that majority of the current taxpayers is tax free. For
those who belong to the income brackets that have
corresponding fixed tax rates plus the percentage of the
excess, they will still enjoy a lower tax rate compared to
the previous income tax.

https://www.imoney.ph/articles/duterte-new-
income-tax-rates-philippines/
14
The simplified tax system will increase the
take home pay of most individuals and
encourage compliance. Self-employed and
professionals (SEPs) with gross sales below
the VAT threshold now have the option to
pay a simpler 8% flat tax in lieu of income
and percentage tax, while those above the
VAT threshold will follow the PIT schedule.

http://www.dof.gov.ph/taxreform
15
 Simplifying Estate and Donor's Tax
 the schedular rates were replaced by a
uniform rate of six percent
 the concept of “stranger” was removed
 the inclusion of an annual exemption
worth P250,000

https://businessmirror.com.ph/a-more-
fluent-donors-tax-under-the-train-law/
16
Illustration: 
Donations were made on January 30, 2018 at
P2,000,000; on March 30, 2018 at P1,000,000; and
August 15, 2018 at P500,000.
How much is the donor’s tax due on these donations?
Date of Amount Donor's Tax
donation

1. January P2,000,000
30, 2018

January 2,000,000
30, 2018
donation

Less: (250,000)
Exempt
Gift

Tax Due / = 1,750,000 P105,000

Payable
17
on the
2. March 30, 2018 1,000,000
March 30, 2018 1,000,000
donation
Add: January 30, 2,000,000
2018 donation

Less: Exempt Gift (250,000)

Total = 2,750,000
Tax Due Thereon 165,000
Less: Tax due/paid on 105,000
January donation

Tax Due / Payable on 60,000

the March Donation

18
3. August 15, 2018 500,000
August 15, 2018 500,000
Add: January 2018 2,000,000
donation

Add: March 2018 donation 1,000,000

Less: Exempt Gift (250,000)

Total =3,250,000
Tax Due Thereon 195,000
Less: Tax due/paid on (165,000)
Jan/March donation

Tax Due / Payable on the 30,000

August Donation
19
Simplified Value-Added Tax (VAT) system

- The Philippines has one of the highest VAT rates

but also the highest number of exemptions in the
Southeast Asia region.
- TRAIN aims to clean up the VAT system through
limiting VAT exemptions to necessities such as raw
agriculture food, education, and health.

http://www.dof.gov.ph/taxreform
20
Exemptions:
• Sale/importation of agricultural and marine
food products in their original state.
• Sale/importation of fertilizers, seed,
seedlings and fingerlings, fish, prawns,
livestock and poultry feeds.
 Importation of personal and household
effects belonging to the resident of the
Philippines returning from abroad and non-
residents coming to resettle in the
Philippines.
https://www.thecorpusjuris.com
21
 Services subject to Percentage Tax
 Medical, dental, hospital and veterinary
services except those rendered by the
professional.
 Services rendered by individuals pursuant
to the employee-employer relationship
 Gross receipts from receipts by lending
activities

https://www.thecorpusjuris.com
22
 Sale of real property for low-cost and socialized
housing, residential lot valued at Php 1,119,500
and below and residential dwelling at Php
3,199,200 and below.
 Education rendered by private and government
educational institutions.
 Lease of residential unit with a monthly rental
not exceeding to Php12,800 .
 Services of banks, non-bank financial
intermediaries performing quasi-banking
functions.

https://www.thecorpusjuris.com
23
Increasing the Excise Tax of Petroleum
Products
• Based on the Family Income and
Expenditure Survey (FIES) 2015, the top
10% richest households consume 51% of
total fuel consumption. The top 1% richest
households consume 13%, which is
equivalent to the aggregate consumption of
the bottom 50% of households. Clearly, this
is a tax that will affect the rich far more than
the poor, given their greater oil consumption
than the poor.
http://www.dof.gov.ph/taxreform/index.php/fuel/24
Part of the tax reform’s initiative is to make
sure that this increase in fuel price will not
impact the finances of Filipinos, especially
the daily commute expenses. To keep the
fares at the same level as it is now, the
government has three mitigating programs
which are the following:

1. Pantawid Pasada Program

25
2. Jeepney Modernization Program


3. Unconditional Cash Transfer

26
Increasing the Excise Tax of Automobiles
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.

http://www.dof.gov.ph/taxreform/index.php 27
Increasing the Tax of Sugar-Sweetened
Beverages

http://www.dof.gov.ph/taxreform/index.php 28