Duterte signs into law first package of tax measure
President Rodrigo Duterte ordered the Department of Finance to immediately submit to Congress the second package of the tax reform measure after he signed into law on Tuesday the Tax Reform for Acceleration and Inclusion (TRAIN), which is expected to generate additional P120 billion for the government.
Republic Act No. 10963 or TRAIN is the first package of the Duterte administration's Comprehensive Tax Reform Program.
"I am directing the Department of Finance to ensure the effective implementation of Package 1 of TRAIN and to immediately submit to Congress Package 2, which deals with corporate income tax early next year, which will complement the revenues of TRAIN," Duterte said in a speech after signing the new tax law in a ceremony in Malacanang.
He noted that one of the TRAIN’s most significant breakthroughs is that "beginning January 1st 2018, those earning below P250,000 (annually) will be exempt from income tax."
He said revenues from the TRAIN will fund the priority projects to ensure a quality education, including free tuition in state universities and colleges, equally, quality health care, social protection and conditional cash transfers, improved infrastructures to the Build, Build, Build program and the reconstruction of Marawi.
The Department of Finance said 70 percent of the incremental revenues under the TRAIN will help support the government’s infrastructure modernization program, which will also include strengthening the country’s military and law enforcement capabilities, while 30 percent will go to social services to fund, among other anti-poverty measures, a targeted cash transfer program for the poorest 10 million households.
Finance Secretary Carlos Dominguez III said the TRAIN also raises “significant revenues” to fund the president’s priority and social infra programs to reduce poverty from 21.6 percent to a targeted 14 percent by 2022.
Aside from exempting those with an annual income of P250,000 and below from personal income tax, TRAIN also adjusts excise taxes on fuel and automobiles.
Dominguez downplayed the effect of the TRAIN on inflation.
Under the approved TRAIN, Dominguez said the inflationary impact of the measure initially estimated at 0.9 percent would slightly go down to 0.7 percent, which would have an even more minimal effect on food, electricity and transportation costs.
In a press briefing prior to the formal signing of the TRAIN bill, Presidential Spokesperson Harry Roque explained the effects of the new tax measure
"Of course, the most important provision is that it will spare 99 percent of our population from the payment of income taxes, because those earning not more than P250,000 per annum will now be tax exempt," he said.
He noted that the minimum wage workers earning P12,000 will still be tax exempt.
Clerks with monthly salary of P15,000 which used to pay P7,000 in taxes will also be tax exempt.
A call center agent who earns P21,000 monthly, used to pay P22,000 in taxes but will now be exempted, Roque said.
A public hospital doctor, with P57,000 monthly salary used to pay P138,000 in taxes, now he will only pay P90,000 or a savings of P48,000, he said.
He also cited the simplified taxes for small and micro taxpayers, which is a payment of a flat tax of eight percent on gross sales in lieu of income and percentage tax.
"Now, of course to cushion the impact of indirect taxes, there is cash transfer provided in the law itself. Ten million households will receive cash transfers of P200 per month in 2018 and P300 per month in 2019 and 2020," he said.
Estate tax is also fixed to six percent for the net estate with the standard deduction of P5,000,000, he said.
"Donors’ taxes is also now at a fixed rate of six percent over and above P250,000 yearly. Now, value-added tax was also modified. There were 54 special laws repealed with non-essential VAT exemptions. thereby, making VAT fairer but exempting from VAT medicines for diabetes, high cholesterol, and hypertension. Purchases of senior citizens and people with disability continue to be exempted from VAT," he explained.
There would be staggered increase in oil excise taxes of up to P6 per liter over a three-year period, with lower rates for essential such as diesel, kerosene, and liquefied petroleum gas, Roque said.
Automobile excise tax will be four percent for vehicles up to P600,000; 10 percent from vehicles between P600,000 to P1,000,000; 20 percent, P1,000,000 to P4,000,000; and 50 percent for hybrid cars; and purely electric vehicles will still have zero excise tax, he said.
"Sugar-sweetened beverage, P6 per liter for drinks containing caloric or non-caloric sweetener; P12 per liter for drinks containing high fructose corn syrup, or combination; three-in-one coffee and milk will be exempt. There’s a new five percent gross receipt tax on cosmetic excise tax," the spokesman said.
For coal excise tax, which generated a lot of debates, he said the increase is from P10 per metric ton to P50; P100 and P150 respectively for 2018, 2019, and 2020, covering both domestic and imported coal.
"This will translate only to a very small increase in terms of the price of electricity. I was told --- a computation has been made that with P9 per kilowatt, the impact on Meralco electricity price of coal is just two centavos per kilowatt per hour," he said.
Those consuming 100 kilowatts per month will pay P780 per month and 100 kilowatts per month and pay P780 per month will only pay P2 due to coal and P15 in total, additional, he added.
"And those consuming 200 kilowatts per month who are paying P1,920 per month will only pay P4 and P30 in total. P4 due to coal and P30 in total. And those consuming 300 kilowatt per hour and pays P2,970 per month will only pay P6 due to coal and P45 in total," Roque said.
He said mining excise tax was doubled from two to four percent, while tobacco excise tax was increased from 31.2 per pack in 2018 to 32.5 between January to June; and then P35 per pack from July 2018 to December 2019; 37.5 per pack in 2020 and 2021; and P40 per pack in 2022 and 2023, followed by an annual indexation of four percent.
"Doc(umentary) stamps was doubled 50 to 100 percent increase, exempt for property, savings, and non-life insurance. Foreign currency deposit units increased from 7.5 to 15 percent final tax on interest income. Capital gains of [non-traded stock] increased from five to 10 percent to 15 percent final tax on net gains only ha. And stock transaction tax increased from 0.05 to 0.6 percent of transaction value. So it’s only 0.1 increase," he said. Celerina Monte/DMS
