TRAIN Law: A walking dead

By: Rozeth May M. Amado

Death and taxes, the two most feared occurrences on this benighted planet, are also the most
mysterious and inexplicable—respectively.

Most fear death, and many would risk everything to avoid death. Death comes regardless of the
body’s ability to renew itself. It takes but a matter of days for blood, bone, skin, muscle, and even hair
follicles to renew themselves. As for taxes, it only gets complicated as the years pass, with inflation and
its relation to excise taxes blurring the lines.

The Tax Reform for Acceleration and Inclusion (TRAIN) Law or Republic Act 10963 law exempts
from paying taxes the first P250,000 annual taxable income, meaning those earning P21,000 a month
would no longer need to pay income taxes.

It also raises the tax exemption for 13th month pay and other bonuses to P90, 000. However, to
compensate for loss of revenue from income taxes, Filipinos will need to pay excise tax on sweetened
beverages, and higher excise taxes on petroleum, automobile, tobacco, mining and coal. TRAIN is the
first package of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).

At first, the TRAIN law sounds laudable. After all, the first package of the tax reform law is
arguably the Duterte administration’s most important legislative victory to date. Truly, the TRAIN law
generate revenues to finance much-needed social and physical investments — the necessary
foundations for sustaining rapid economic growth.

However, as the law took effect at the start of the year, the optimism toward the TRAIN became
more subdued as consumers anticipated the pinch of higher commodity prices. Electricity rates, for
instance, are expected to go up by 8 centavos per kilowatt-hour. This means that a household
consuming 200 kWh monthly will see a P16 increase in its electricity bill.

While the government has assured the public that inflationary effects resulting from the TRAIN
will be minimal, the central bank acknowledged that it may raise interest rates if secondary impacts,
including higher prices of consumer goods indirectly affected by the TRAIN, as well as a clamor for
higher wages, would push inflation beyond target.

Without a doubt, the TRAIN law has its costs and benefits. But still, the administration failed to
look at the biggest missing link – corruption. No amount of reform in taxation will benefit the public—
rich or poor—if corruption remains as our number one problem. If politicians charged with plundering
the nation’s treasuries and resources are freed, if ignorance in our people stands as a politician’s
primary reason for being elected and re-elected, then there’s no stopping thieves from walking the halls
of power.

Besides, according to Philippine Chamber of Commerce and Industry (PCCI), more than 66
Billion peso are lost due to black market trading, the influx of money to fund illegal activities, unlawful
use of capital, backdoor commerce, illegitimate transfers, smuggling, the illicit drug trade. In addition, on
a study released by Social Weather Station (SWS), reveals that 12% of the newly released 2018 budget
which constitute to 1.65 billion is allocated to government agencies such as Philippine National Police,
Bureau of Customs and Department of Local and Interior Government, the three government agencies
that has been in the public eye for rampant corruption.

Corruption, is not the only issue on the said law. Having said that, TRAIN cuts personal income
taxes and hikes taxes on certain products like sugar-sweetened beverages and petroleum. In doing so,
TRAIN adheres to the basic idea that people should be taxed for what they take out of the economy, not
for what they put into it. This also means tax exemptions for small scale business owners and workers
earning minimum wage. However, while TRAIN removed many tax exemptions, it also introduced new,
almost arbitrary ones, like electric vehicles and pickups.

The biggest problem with TRAIN is that it’s not very progressive. Sure, its taxes reduce the
incomes of the richest individuals, like CEOs and other top taxpayers. But it will also hurt the incomes of
the poor. According to Department of Finance Fax Calculator, the biggest winners from TRAIN are the
unskilled workers, who will enjoy a 4.3% bump in their monthly incomes, followed by skilled workers
(4.1%), partly skilled workers (4%), professionals (3.8%), and the middle class (3%).

TRAIN hurts the poor chiefly because of its higher excise taxes and the faster rise of prices or
higher inflation it causes. Fewer VAT exemptions and higher excise taxes will push up the prices of food
and transportation, and this will eat away at people’s take-home pay.

It’s unfortunate that TRAIN’s new taxes will tend to reduce the take-home pay of the poor.
Without sufficient offsetting transfers, the new taxes could end up harming the poor instead of
improving their plight. Added with the existing corruption and condition of the Philippine government, a
TRAIN law needs a comprehensive leadership and review every now in then to avoid illegal profiteering
that harms the ordinary Filipino citizens.

Still, no nation has ever taxed itself to prosperity. It’s a superstition designed to make way for
parasites. A truly prosperous nation is the one whose primary capital is human dignity and its never-
ending enrichment. This is money well spent.

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