President Rodrigo Duterte has greenlighted the implementation of the Tax Reform for Acceleration and Inclusion, also known as the Train Bill.
Referred to as the “Christmas gift to all Filipinos,” the law will now allow employees who earn less than P250,000 annually to a bigger take-home pay. The first package of the bill will be effective on the first day of 2018.
Aside from the recently ratified law, Duterte said that he expects more tax reform measures by next year.
Here’s a breakdown of what this law will mean for ordinary Filipinos:
THE GOOD
•Income Tax
Simply put, income taxpayers who earn approximately P22,000 monthly and below are now exempted from income tax payment. These employees will be able to receive their salary without any deductions because of tax.
Aside from that, Presidential Spokesperson Harry Roque said the law also simplified taxes for small taxpayers, including self-employed professionals, with the payment of a flat tax of 8 percent on gross sales or receipts instead of income and percentage taxes which are filed once a year.
•Estate, Donors, and Value Added Tax
Train will also lower estate tax. Roque said that “taxpayers would now have to pay a fix rate of 6 percent for the net estate with the standard deduction of P5 million.”
The presidential spokesperson also added that donors’ taxes is also now at a 6%-fixed rate over and above P250,000 yearly.
He also said the Train Bill changed the value-added tax (VAT) and made it “fairer” after it revoked 54 special laws that provided nonessential VAT exemptions.
•“Simplified and Fairer” Tax System
Sonny Angara, chair of the Senate ways and committee, said that “next year would mark the beginning of a new, simplified and fairer income tax system.”
The Train Bill has a target revenue of P120 million. 70 percent of which would go to the Build, Build, Build program, and other infrastructures, including military infrastructure. The remaining 30 percent will go to education, health, housing, and other “social services and mitigating measures.”
THE BAD
•Increased prices of products and other services
Due to reduced taxes, the government need to make up for loss of revenue. Because of this, certain good will have higher taxes. Buyers and consumers should expect higher prices for fuel and gas, electricity, vehicles, tobacco, and other products and services.
Though income taxes will greatly decrease for almost all employees, they would need to spend more money on things that they might need.
•Increase in DST and dollar deposit
Aside from increased prices of goods, Roque also said documentary stamp tax (DST), which is a tax levied on special documents, papers, agreements, etc., increased 50 percent to 100 percent, except for property, savings and nonlife insurance.
“Foreign currency deposit units increased from 7.5 to 15-percent final tax on interest income. Capital gains of non-traded stocks increased from 5 to 10-percent to 15-percent final tax on net gains only,” Roque said.
