Tax Reform for Acceleration and Inclusion {TRAIN} LAW. Tax Reform for Acceleration and Inclusion (TRAIN)

Read the reference about the TRAIN LAW, and make a meaty and substantial reaction paper stating your position on the issue. A Reaction Paper is a type of assignment which requires personal opinion and conclusions on a given topic. Follow the proper rules in writing a reaction paper.

DE TASK1: Read about Tax Reform for Acceleration and Inclusion {TRAIN} LAW. Tax Reform for Acceleration and Inclusion (TRAIN) The Tax Reform for Acceleration and Inclusion {TRAIN} or the Republic Act No. 10963 was signed into law by President Rodrigo Duterte on December 19, 2017 and implemented on January 1, 2018. It was the initial package of the Comprehensive Tax Reform Program which aims to rationalize the Philippine tax system. The TRAIN Law seeks to generate enough revenue over the next three years, and on and on, so that the government can provide better services, work on infrastructure projects that will hetp us develop economically, and put an end to the country’s complex tax system. The overarching goal of the first package of the TRAIN is to "create a simpler, fair, and more efficient system through this program, the richer tax payers of the Philippines will pay a greater contribution to enable the government to execute its programs and services targeted to the general improvement of the country. especially the less fortunate. Salient provisions of TRAIN LAW There are six (6) main key provisions, three (3) additional excise taxes, and four [4) financial taxes. 1. Simplified Value Added Tax The government’s aim to elevate the less fortunate in the Philippines and drive development is exemplified as the TRAIN repeats 54 out of 61 of the non—essential VAT exemption. In order to protect these less fortunate persons, as well as small and micro businesses, they are exempted from VAT on goods and services of marginal establishments. 2. Income Tax The TRAIN lov’vers the Personal Income Tax {PlTij or all taxpayers except the n’ch". Additionally, minimum—wage earners are still exempted from PET. The Law also ensures a minimum wage earner who incurs a small raise will not have his overall salary (with the PIT deducted} less than minimum wage. Also, married couples where both parties are working may be exempted up to a total of P50fl.000. This does not include the exemption from the first “0,000 of their thirteenth month pay and additional bonuses. Finally, Self-employed and professionals with gross sales below VAT can only pay 3% flat tax instead of their income and personal tax 3. Cars There shall be levied, assessed and collected an ad valorem tax on automobiles based on the manufacturers or importer’s selling price. 4. Excise Tax of petroleum products This tax aims to increase efforts towards decreasing the consumption of harmful fuel, and veering towards a healthier, more sustainable future. The price of fuel also varies due to the global inflation of oil. Gas prices and diesel are yet another high-impact item under TRAIN, especially because these excise taxes have not been touched since 199?. Excise taxes cover those consumer products and goods with negative effects and affect those who use more of it by asking them to pay more. 5. Sugar

The SSE. {Sugar-Sweetened Beverages) tax will promote a healthier Philippines". It achieves this by reducing the increasing number of diabetes and obesity cases, through raising awareness, promoting the consumption of healthier products and encourages companies to innovate healthier alternatives. TRAIN imposes new taxes of PB per liter on drinks containing sweeteners and P12 per liter on drinks containing high-fructose corn syrup. Milk, 100% natural juice and 3—in-1 instant coffee drinks are exempt from the excise tax. 6. Simplified Estate and Donors Tax The TRAIN aims to simplify property purchases, transfers and donations in order to make the land market more efficient thus ensuring the usage of properties is maximized. The estate tax is now reduced to 6% based on the net value of the property. It also has a standard deduction of P5 million as well as a P10 million exemption on the family home. The donor tax is also reduced to 6% of the net donations for gifts above P250000 on a yearly basis. 7′. Additional Excise Taxes. There are three additional excise taxes, namely coal, cosmetics and tobacco: Coal Excise Tax. lCoal is a cheap source for power generation and has its uses in multiple industries such as the chemical and pharmaceutical industries. It is also a prime ingredient for activated carbon, carbon fibre and silicon metal. However, it remains a major source for air pollution in the Philippines. The aim of the excise tax is to shift towards renewable energies and generate additional income for building infrastructures and social services. Cosmetics Tax. Starting 2018, all cosmetic surgeries, aesthetic procedures, and body enhancements intended to improve, alter, or enhance a person’s appearance are now subject to a tax of 5%. However, procedures necessary to ameliorate a deformity arising from, or directly related to a congenital or developmental defect or abnormality, a personal injury resulting to an accident or trauma, or disfiguring disease, tumour, virus or infection are tax exempted. Tobacco Tax. The excise tax on cigarettes aims to reduce the amount of smokers and respiratory and cardiovascular diseases one can catch from the act, as well as generate additional revenue for health oriented programs and services. 8. Financial Taxes There are four taxes that were adjusted along with the TRAIN Law. Firstly, the documentary stamp tax was increased by 100% except on loans with only 50% increase, but not for savings, property, and non-life insurance. Secondly, the final tax on foreign currency deposit unit {FCDU} was increased from 15% to 15% of interest income. Thirdiy, capital gains tax of non-traded stock was increased from 5% to 10% of final net gains. Finally, the stock transaction tax was increased from 0.5% to 0.6% of total transaction value. 9. Finally, there are three additional taxes that do not fall under the aforementioned categories. These are the tax on lottery winnings and P880 prizes, documentary stamp tax, and mining tax. With the impiementation of the TRAIN Law, all P680 lotto prizes are taxed at 20% if the prize exceeds P10,0t]0. The documentary stamp tax has been doubled, resulting in stamp taxes ranging from P150 to 193.00. Finaliy, excise tax rates on all non-metallic minerals and quarry resources, and all metallic minerals including copper, gold and chromite, will be doubled, from 2% to 4%, as well as excise tax on indigenous petroleum, which will be doubted from 3% to 6%. Economic fmpficarions of TRAIN in response to the need to upgrade the country’s public infrastructure, We have embarked on an expansionary fiscal policy. We will spend P8 to P0 trillion (or $100 to $180 billion) for public infrastructure from 2017 to 2022. The infrastructure budget will rise from 5.4% of GDP in 201? up to 13% of GDP in 2022.

In like manner, investment in social services will also steadily increase to 40% of the national budget or 9.2% of GDP in 2022. To finance such expansionary fiscal strategy, the government has adopted a two-pronged approach. First, we have decided to expand the deficit ceiling from 2% to 3% of GDP. Second, we intend to increase revenue effort, defined as total revenues as percent of GDP, by reforming the tax system and improving tax administration. TRAIN is an essential tool in our expansionary fiscal strategy. It will not only generate additional resources for priority programs and projects but also make our fiscal program more sustainable. Mitigating Measures and Inflation Outlook With TRAIN The most controversial aspect of TRAIN is the adjustment in excise taxes for petroleum products and the taxes on sugar-sweetened beverages (8885). For the petroleum products, the last time the taxes were reset was in 1997. For the sugar-sweetened beverages, there is a compelling health argument aside from a revenue argument in imposing the "sugar taxes". Admittedly, some households will be worse off as a result of TRAIN. But in order to compensate for the inflationary impact of TRAIN, we have set aside P200 per month per household to the poorest 50% of households. This means that some 10 million households will benefit from this mitigating measure. In effect, TRAIN takes into consideration the immediate, the medium, and the long-run effects of the law. Admittedly, it is not a perfect law, but on balance it is a big plus for the economy.

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