TAX REFORM FOR ACCELERATION AND INCLUSION

The goal of the first package of the Comprehensive Tax Reform Program (CTRP) or TRAIN is
to create a more just, simple and more effective system of tax collection, as per constitution,
where the rich will have a bigger contribution and the poor will benefit more from the
government’s programs and services.

Train Bicameral Conference

December 1, 2017

Submission of TRAIN to Malacañang

January 1, 2018

The Vision of Train

By 2020

Poverty rate reduced from 26 to 17% (or some 10 million Filipinos uplifted from poverty)
Law Abiding Country

Peace within the country and with our neighbors.

Achieving high middle income status, where per capita gross national income (GNI) increases
from USD 3,000 to USD 4,100 by 2022 in today’s money.

By 2040
Extreme Poverty Eradicated

Inclusive economic and political institutions where everyone has equal opportunities.

Achieve high income status, where per capita GNI increases from USD 3,000 to USD 12,000 BY
2040 IN today’s money

Achieving the Mission

For us to be able to achieve the vision of TRAIN, we need to lead the investment growth of 7 to
10 percent. Over the long term, all these investments require additional funds of around 1 trillion
pesos per year in 2016 prices, on top of the current 1.7 trillion pesos. Over the medium term, the
government will need to raise some 366 billion per year between 2016 and 2022 (or 2.2 trillion
pesos in total)

The Tax Reform for Acceleration and Inclusion (TRAIN) is the first package of the
Comprehensive tax reform program (CTRP) envisioned by president Duterte’s administration,
which seeks to correct to number of deficiencies in the tax system to make it simple, fairer, and
more efficient. It also include mitigating measures that are designed to redistribute some of the
gains to the poor.

Through TRAIN every Filipino contributes in funding more infrastructure and social services to
eradicate extreme puberty and reduce in equality towards prosperity for all. TRAIN addresses
several weaknesses of the current tax system by lowering and simplifying personal income taxes,
simplifying estate and donor’s taxes, expanding the value added tax (VAT) based, adjusting oil
and automobile excise taxes, and introducing excise tax on sugar – sweetened beverages.

What will the tax reform fund?

1. Education

The tax reform will be able to fund investments in education, achieving a more conducive
learning environment with the idea teacher-to-student ratio and classroom-to-students
ratio:

Achieve the 100% enrolment and completion rates

Build 113,553 more classrooms

Hire 181,980 more teachers between 2017 and 2020

2. Healthcare Services

With the tax reform, we can invest more in our country’s healthcare by providing better
services and facilities:

Upgrade 704 local hospitals and establish 25 local hospitals.

Achieve 100% Phil Health coverage at higher quality of services.

Upgrade and/or relocate 263 rural and urban Health units to disaster – resilient facilities.

Build 15,988 new barangay health stations.

Build 2,424 new rural health units and urban health centers

Between 2017 and 2020, hire an

Additional 2,424 doctors, 29,466 nurses, 1,114 dentist, 3,288 pharmacist, 2,682 medical
technologist, 911 public health associates, and 2,497 UHC implementers

3. Infrastructure Programs
 The additional revenue
raised by the tax
reform will be used to
fund the infrastructure
program of the
department of public
works and highways
(DPWH), which
consists of major
Highways, express
ways, and flood
control projects.
Funding these major
infrastructure projectis
possible with the tax
reform for our country
to sustain high and
inclusive growth.

New taxes

Aside from increase and

decrease of certain taxes,
Train also introduces new
taxes in the form of excise tax
on sweetened beverages and
non-essential services.

Sweetened Beverages

Non-essential services

Invasive cosmetic procedures directed solely towards improving, altering, or enhancing the
patient’s appearance is now subject to excise tax of 5%.

PCSO winnings
Previously, PCSO winnings, regardless of amount, were exempt from tax. Train subjects PCSO
winnings to a 20% final withholding tax if the amount is more than P10,000.

Simplified tax compliance

Apparently, the Philippine tax system is a very complicated one. This was certainly considered
by Congress when it enacted the Train law. Consequently, Train introduces amendments which
are geared towards simpler tax compliance. Some of these amendments are:

1. The Income Tax Returns shall not be more than 4 pages

2. The Tax Return for final and creditable withholding taxes shall be filed quarterly instead
of monthly
3. With regard to estate tax, the following measures were adopted to simplify its
computation and payment:
o In lieu of actual funeral expenses (up to P200,000) and medical expenses (up to
P500,000), Train increases the standard deduction (wherein no substantiation is
required) from P1,000,000 to P5,000,000
o Notice of death is no longer required
o CPA certification is now required only if the gross estate is above P5,000,000 (up
from P2,000,000)
o The deadline for filing of estate tax return is now one year from death (before, 6
months from death)
o Bank deposits left by the decedent may be withdrawn by the heirs subject only to
6% withholding tax. Before a certification from the BIR that estate tax has been
paid was required.
4. Beginning January 1, 2023, the filing of VAT Return and payment of tax shall be done
quarterly instead of monthly
5. The BIR is required to act on application for VAT refund within 90 days. Otherwise, the
BIR official, agent or employee will be criminally liable.
6. The Financial Statements of a taxpayer should be audited if the gross annual sales,
earnings, receipts or output exceed P3,000,000 (up from P150,000)

With the enactment of the Train law, the government expects to generate more revenues to fund
its "Build, Build, Build" projects and other programs. At the same time, the labor sector is
expected to be freed from the burden of outdated and inequitable personal income tax.
Hopefully, this benefit for the workers can still be achieved despite the increase in prices of some
goods that they consume.