‘Tax Reform is Pro-Poor’

By Butch Bacaoco

The Tax Reform for Acceleration and Inclusion (TRAIN) being pushed by the Department of Finance (DoF) will benefit poor Filipinos.


Assistant Secretary Maria Theresa Habitan of the Department of Finance explains the benefits of the Tax Reform for Acceleration and Inclusion during the dialogue with workers yesterday at the Pavilion Hotel, Bacolod City.*

Thus said Assistant Secretary Maria Theresa Habitan during the dialogue with workers yesterday at the Pavillon Hotel, Bacolod City. The activity was a joint undertaking of the Department of Finance, Partido Manggagawa Sentro ng Nagkakaisa at Progresibong Manggagawa and Workers Development Center–Negros.

Habitan explained that TRAIN, the first package of which was already approved by the House of Representatives, aims to help raise P2.2 trillion from 2016-2022 to fund the government’s infrastructure thrust and intensified, inclusive social services.

Government will raise the amount thru judicious borrowing, efficient budget management, tax and customs administration reform and tax policy reform.

Under TRAIN, income earners with an annual taxable income of P250,000 and below will be exempt from personal income tax. Those who earn more than P250,000 up to less than P5 million will pay a graduated tax which is lower than the current tax rate. Bonuses not exceeding P82,000 will still be exempt from income tax.

“The lowered personal income tax rate will benefit 83% of the Filipinos,” Habitan pointed out.

The amended personal income tax, estate tax and donors tax will deprive government of P137 billion in revenue, which has to be offset thru some other means, such as streamlining the VAT exemptions and imposing excise tax on petroleum and automobiles, she added.

Habitan stated that Vietnam and Thailand have a 10% value added tax rate, while the Philippines imposes 12%. However, Vietnam and Thailand exempt only 25 and 35 lines of products and services, respectively, while the Philippines has a higher number of exemptions.

The National Internal Revenue Code exempts 59 lines of products and services from VAT, while special laws exempt another 84, bringing the VAT-exempt lines to 143.

“We need to expand the VAT base by limiting exemptions and using the funds raised to provide subsidies for the poor,” she said.

However, raw sugar and other raw agricultural products will continue to be VAT exempt, and senior citizens and persons with disabilities will still enjoy VAT exemption.

Other areas which will be covered by VAT are cooperatives, except those with gross annual sales of less than P3 million, power transmission, socialized low-cost housing, house rentals and domestic shipping importation.

On the excise tax on oil, Habitan stressed that the P4.35 per liter excise tax on gasoline and the P3.50 per liter excise tax on diesel have been unchanged since 1997 when the excise taxes on the two fuel products were 20% to 30% of the fuel price.

Now that fuel prices have almost doubled compared to 20 years ago, TRAIN proposes to impose an excise tax of P6 per liter, which would be implemented on a staggered annual basis of P3, P2 and P1 for the next three years.

To appease the fears that the oil excise tax will hit hard on poor families, Habitan explained that the upper 10% of rich Filipino families account for 51.5% of national oil consumption. Thus, the rich, who can well afford to pay, will bear the brunt of the excise tax.

“Tax reform, when seen as a package, provides benefits to 99% of Filipinos. More important than the tax is how we spend the money to benefit Filipinos. The tax reform is an investment in our future,” Habitan emphasized.*

 

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