THE TRAIN HAS ARRIVED

Republic Act No. 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) law that Congress passed several weeks ago took effect New Year’s Day 2018. Four days into the new tax legislation, I deem it best to reserve judgment. The law’s intended effects and consequences should be given time to take hold and manifest themselves.

I have been supportive of the law, to the extent that it had intended to streamline income taxation — that is, make things less complicated for the ordinary taxpayer. However, I have also been vocal against its calibrations in various consumption taxes. In particular, I was not in favor of significant increases in fuel taxes, as well as the new tax on sweet drinks.

Former Finance secretary Gary Teves, a friend as well as a colleague in the consulting field, recently shared with friends and associates his thoughts on TRAIN and how it could impact on taxpayers and consumers. I wish to pass on to you, our readers, his comments on the new tax law. I find his reflections very interesting, and I believe you will, too.

Gary described what he called “Winners and Losers under TRAIN” and noted that the gainers include salary earners as well as SEPs or self- employed individuals and professionals, and MSMEs or micro, small and medium-sized businesses. All three tax-paying segments are bound to enjoy “more disposable income” as a result of reduced income tax rates and new tax exemptions.

The threshold was set at P250,000, and those earning below this — or roughly P20,000 monthly — are exempt from paying income taxes. As for those working for themselves or are earning professional fees, as long as their annual income is not below P250,000 and not above P3 million, they can opt to pay tax using the new tax brackets — ranging from 20% to 35% — or an 8% flat tax on gross sales or receipts.

I am uncertain, but I believe the latter may replace the present mechanism using Optional Standard Deduction ( OSD) of 40%, which effectively places the