A contentious law

HOW CAN the Tax Reform for Acceleration and Inclusion Law, also known as TRAIN, affect the vulnerable people in society, from low-income earners to the poor? In the Department of Finance’s ( DoF) view, they stand to benefit from it.

In a news release, the department called attention to the tax breaks for the working classes and the self- employed as well as the cash grant for the poor that the passage of TRAIN has made possible.

Since the start of 2018, compensation earners and self- employed individuals who make an annual taxable income of P250,000 or less, or roughly P21,000 a month, are exempted from paying personal income tax. The 13th month pay and other bonuses they receive will not be taxed as well.

Those who earn more than a quarter of a million pesos, but not exceeding P2 million, are now required to pay only 20% to 30% personal income tax. In 2023, the tax bracket will be lowered to 15% to 25%.

To offset the negative effects of slashing personal income taxes on government revenue, TRAIN has raised excise taxes on fuels, automobiles and sin products, among other measures.

Up to 30% of the money that TRAIN raises is allocated for social services, like the Unconditional Cash Transfer ( UCT) program of the government for the poor. This year, the beneficiaries of the program — around 10 million poor households — are ought to receive P200 monthly ( P2,400 a year) from the government. Next year, they will receive a bigger amount of P300 monthly ( P3,600 a year).

The DoF added that the UCTs should help the poor deal with the “minimal impact of the tax reform law on inflation.”

“Build, Build, Build,” the ambitious infrastructure program of President Rodrigo Duterte’s administration, which TRAIN will help finance, will also provide employment opportunities for the poor, according to Carlos Dominguez III, secretary of the Department of Finance.

But not everyone is on board with the provisions of TRAIN. Last month, a consumer advocacy group called Laban Konsyumer, Inc. ( LKI) asked the Supreme Court to nullify the law because it “negatively affects millions of Filipino consumers, particularly those from the low-income and poor families.”

The group was opposing the increases in the excises taxes on coal, diesel, liquified petroleum gas, and kerosene in particular. Victor Dimagiba, head of the LKI and a former undersecretary for consumer protection at the Department of Trade and Industry, was reported in this paper last month as saying that the aforementioned commodities are necessary for subsistence and that Filipinos have to consume them, regardless of the cost.

The low-income and poor families who constitute the majority of the country’s population, he noted, would be heavily burdened by the increases.

“[I]f not restrained now and later nullified,” the provisions of TRAIN “betray the very purpose for its enactment which is to provide, as much as possible, an equitable relief to a greater number of taxpayers and their families in order to improve the levels of disposable income since a tax on staples is a tax on the right of individuals to live,” he was quoted as saying.

Mr. Dimagiba also took issue with the new personal income taxation scheme, saying that it would only benefit those in the higher income brackets at the expense of those with income not exceeding P250,000.