Readings in Philippine History/ Rizal

Exercise 4.3.1
Chuga-Chuga, Choo-choo…Train!

Name: Group 1/ A20

Renzo Perez Alphora
John Andrew Balancio
Jeofrey Kaneida Camarse
Adelinne De Leon
Zane Nikia Domingo
Jeremiah Eledia

Instructions: In 2017, the Train Law revolutionized taxation in the Philippines as it was seen to financially
empower the people by reducing personal income tax. However, it was also seen in a negative light
because of drastically inflated consumer prices due to the increase in custom duties on petroleum products
and sweetened beverages. Research on the significant provision of the TRAIN Law and analyze their
implications by citing concrete examples. After your analysis, give your personal view on the issue.

The Tax Reform for Acceleration and Inclusion (TRAIN) Law designated as Republic Act No.

10963 was initially implemented to produce the adequate amount of revenue to attain the vision of the

succeeding years after the reform being put to place, to supposedly eradicate poverty in the country, and

to render inclusive opportunities to all, thereby achieving a higher income status for the country.

Conversely, people have been experiencing adverse effects of its execution, and that the plight of poverty

has further plummeted down significantly for the poor income class families.

CASE 1: A phenomenological study pivoted on the Impact of Tax on Poor Income Class Families

residing in Davao City shows how much the inflation adversely impacted the products consumed by the

poor, including but not limited to rice, fish, and most vegetables whose prices have radically increased.

Along with the latter is the predicament of the budgeting of the families as they must eke out a living

from strict survival, balancing other utility bills and the rest of their debts. Although the inflation and

income inequality can be at odds for some social classes on some circumstances in which the effects

varying between food and non-food inflation are taken into account (e.g., producers are relatively more
benefited from high food prices than people residing in urban areas). However, since studies have

magnified the disproportion between poor income class and wealthy families, it consequentially suggests

that regardless of the kind of inflation there may be, a more significant fraction of the poor would still be

struggling in a country that is already affected by a financial crisis and increased prices of fuel, food, and

commodities.

As a student, whose understanding about this reform is only further deepened by parsing over

some studies regarding the inauspicious impacts of the TRAIN law, I can say that from the gleaned

interview data, the effects of the said law haven’t brought out smoothly the anticipated advantages it

should have on the economy and the citizens. It is most likely that the Dabawenyos, based on the study,

are not the only ones going through the abovementioned financial setbacks in the country. In fact, these

affected people are at greater odds with the problem now that they must deal with additional

predicaments, including but not limited to difficulty in meeting basic needs, budgeting, and increasing

debt and reliance on loans. The latter is what’s mostly voiced out by the poor, and I think not only this

pulls down their status but also the already poverty-stricken nation. It somehow begins a negative

feedback loop where the citizens and the nation are altogether impeded from progressing to be on par

with the neighboring countries.

CASE 2: Nonetheless, it’s not all the time it is observed that the law has downsides as this will be

discussed in the following example, the TRAIN law has quelled down the case of poverty and has upped

the employment rate by a small amount of percentage. As stated in the study of Trespalacio et al.(2019),

the Philippines is the 2nd fastest growing economy in Asia based on its GDP in the last ten years. The

Philippine government increased the annual national budget to support and sustain the growth of the

country. The Bureau of Internal Revenue (BIR) is the highest contributor in collecting the country's total

income, which is the source of the majority budget of the government on its projects. The study tries to

observe the preliminary effect of Tax Reform for Acceleration and Inclusion (TRAIN) Law on selected

socio-economic indicators, namely unemployment rate, poverty reduction, and inflation rate if it is more
straightforward, fairer, and more efficient in taxations. Based on the findings and content analysis from

various government agencies and published journal articles, the unemployment rate decreased from 5.7%

in 2017 to 5.3% in 2018, and the poverty incidence improved from 13% in 2015 to 8.5% in 2018. The

first package of the TRAIN law was signed in December 2017, taking effect only in the first quarter of

2018. This tax revision has helped society, especially the middle class because these people can withstand

the price increase in essential commodities. They are more likely now to sustain their jobs by reducing the

tax in their salary to increase their take-home pay and improve their socio-economic status.

The primary difference found in case 2 contrasted to case 1 is that there’s only a fraction of

people in the social classes whose lives are benefited, most of which are from the middle class. Of course,

this would be a propitious indicator of what the law has been generating into the lives of middle-class

families. They have been allowed to adjust their situation and have some things in favor of their lifestyle

with the inclusive services that the TRAIN law has offered them. This is of course an impressive result

seeing that there have been gradual positive changes in the employment and poverty rate in the country.

However, if this only serves a better purpose for only a fraction of the social class, then I think the

government must better shift their focus on resolving the issues of their system in the tax revision.

Gradual progress may be accepted, but I think if this only applies to the middle-class, then there must be a

greater issue that needs to be magnified− of the urgency for the scales to be tipped in favor of all the

financial status of all social classes in the country for the results to be a generalized indicator of the very

much presumed advantages of the TRAIN law.

References:

Boco, R., Morales, E., Leonor, R., Ebrahim, A., Mundiz, JC., Orilla, C., Montes, R., Mendoza, S., Dano,
S. (2019). The Impact of Tax Reform for Acceleration and Inclusion (TRAIN) Law on Poor Income Class
Families: A Phenomenological Study. Retrieved from https://osf.io/k2n6r/download

Trespalacio, J. P. J. S. (n.d.). Effect of Tax Reform for Acceleration and Inclusion (R.A. 10963 - TRAIN
Law) on Selected Socio-Economic Indicators: A Preliminary Assessment. DBpia. Retrieved
October 13, 2021, from https://www.dbpia.co.kr/Journal/articleDetail?
nodeId=NODE08765278&fbclid=IwAR22UNADikYAh7JbNgIM2Zl4sJR_NNyo9MM0Vhj9p7
CGD77p3UcBjvkimtY