Last December 19, 2017, President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) bill that aims “to make the tax system fairer and simpler” (http://beta.philstar.com/headlines/2017/12/19/1769882/duterte-signs-2018-national-budget-tax-reform-bill ). Under this new law, the most eye-catching part for the public is the personal tax exemption of those with annual taxable income of Php250,000 and below, and the raise from Php82,000 to Php90,000 for the tax exemption for the 13th month pay and other benefits.
Other benefits from this tax reform is the decrease of tax rate for Estate tax (up to 20% down to a fixed 6%), Donor’s Tax (up to 15% down to 6% for those above Php250,000). Meanwhile, the taxes for other items (like coal, mining, tobacco, petroleum and automobiles) have increased. This is the part where the government acquires the needed funding for its “Build, Build, Build” Program.
Overall, how does it affect us? Considering the higher tax exemption for income, 13th month pay and other benefits, we are to expect a higher consumable income. We will have more funds to address our necessities. However, those individuals whose incomes are already below the taxable rate in the previous tax system will not feel this effect. Their net take home pay will be the same as before the TRAIN.
On the other hand, the increase in tax rates for petroleum will not only affect the commuters. It will create a domino effect to other commodities due to the transport system. Based on the past trend, whenever the price of petroleum increases, all the prices of other goods eventually increases. Hence, we can expect an inflation of prices of our basic necessities.
With the income and prices moving, it is still to be seen whether the benefits outweigh the costs of the TRAIN law.