The Tax Reform for Acceleration and Inclusion (TRAIN) aka Republic Act 10963, signed into

law by President Rodrigo Duterte last December, has taken effect at the start of 2018. This
is the first among the many reform measures to be implemented by the administration.

Dispelling Myths or Wrong Ideas

As it suggests, TRAIN aims to benefit the entire nation. Firstly, it aims to correct the
deficiencies of the past tax system, making it simpler, more efficient and fairer. Contrary to
what naysayers say, the TRAIN will benefit the poor more by promoting equity.

In principle, people pay taxes in accordance to the income they make. Therefore, those who
earn more will pay higher taxes (proportionate to their income). Most of the population
have been complaining the rich tend to get away with not paying their taxes due to
loopholes they find in the tax laws thereby getting exemptions that they do not deserve,
leaving the rest having to shoulder the burden of paying the taxes which has not made
things better for them.

As a way of addressing tax evaders, there are measures included in TRAIN:

Relaxation of bank secrecy laws in fraud cases. Those who earn profits from spurious
sources tend to avoid paying taxes because of the very nature of their activities. This will
ensure they get what is due to them.

Using electronic receipts. There are times when people tend to misplace or even not keep
their receipts. The electronic receipts will provide citizens a permanent copy.

Another myth TRAIN dispels is that this would cause the prices of basic commodities to
skyrocket. The Department of Finance, the agency that will Implement TRAIN said that
although prices may increase, it will be incremental, not sudden.

On Excise Taxes
In relation to that, TRAIN will adjust excise taxes on certain products. One such case is
taxes will increase on non-essential products like softdrinks. If there is any indication, it
aims to encourage people to buy products that will benefit their health. This is similar to the
“sin taxes” levied on alcoholic drinks and cigarettes.

Another instance would be on those planning to buy a car. TRAIN simplifies excise taxes on
cars being purchased. Lower-priced cars will be taxed at lower rates and high-end cars at a
higher rate. It can be inferred here that the government recognizes cars as a necessity and
seeks to correct the wrong notion cars are entirely luxury items. It is for this reason
expensive cars have higher tax rates. Looking at it from a much bigger picture, taxing cars
serves to encourage he public to take to commuting more to also reduce traffic.
House of Representatives[edit]
House Bill No. 4774 is credited as the original measure that led to the TRAIN Act. It was endorsed by
the Department of Finance (DOF) to the Philippine House of Representatives in September 26, 2016 as the first
package of a wider CTRP.[14] It was filed before the legislature on January 17, 2017 by Congressman Dakila
Cua[15] of Quirino. Cua is also the chairperson of the Ways and Means Committee of the Congress which deals on
taxation.[14]
After thirteen hearings which was done within the span of four months, the House Bill No. 4774 was consolidated
with 54 other tax-related bills to come up with a House Bill 5636, a substitute bill which had "moderate" changes
from House Bill 4774. The substitute measure was approved on May 8.[14]
The DOF requested President Rodrigo Duterte to declare the bill as "urgent" on May 29, 2017. Bills passed on the
second reading by the Congress but are not certified "urgent" by the president could only be voted upon after copies
of the given measure is provided to House of Representatives members three days before the day of the third and
final reading.[14]On May 31, 2017 just before the 17th Congress adjourn its first regular session, the bill passed the
final reading with 246 voting for and 9 against the bill. Only one made an abstention. Most of those who opposed
were from the Makabayan bloc.[16]

Senate[edit]
A version of the bill was filed in the Senate on March 2017 by Senate President Aquilino Pimentel III. By May 2017
six public hearings were conducted by the senate. The Senate had to wait for the House of Representatives version
to get pass before it could start plenary discussions like other bills on budget or tax and appropriations. The Senate
voted 17-1 to approve the Tax Reform Acceleration and Inclusion (TRAIN) bill, with Sen. Risa Hontiveros being the
lone dissenter on Nov 28, 2017. On the succeeding voting for the TRAIN, the positive votes were cast by Senators
Sonny Angara, Nancy Binay, Frank Drilon, JV Ejercito, Chiz Escudero, Win Gatchalian, Dick Gordon, Gringo
Honasan, Loren Legarda, Joel Villanueva, Koko Pimentel, Grace Poe, Ralph Recto, Tito Sotto, Cynthia Villar and
Migs Zubiri. The negative votes were cast by Senators Ping Lacson, Risa Hontiveros, Bam Aquino and Antonio
Trillanes IV[14]
Duterte's certification of the TRAIN as "urgent" allowed the bill to get passed the second reading[17] on November 28,
2017.[18] Within the same day, the Senate bill passed the third and final reading with 17 senators voting for the
bill.[19] Only Risa Hontiveros voted against the bill.[17]

Bicameral Conference Committee[edit]

The Bicameral Conference Committee consolidated the bills passed by the House of Representatives and the
Senate. The committee then approved a bill which favored the Senate version on December 11, 2017 and prepared
a report after for ratification of both chambers of the Congress and signing of the President.[20]
the House of Representatives and the Senate ratified the version of the bill prepared by the Bicameral Conference
Committee on December 13, 2017.[21]

Vision and goals of TRAIN Law[edit]

The TRAIN Act aims to address the reputed weaknesses of the Tax Code, specifically through the following
objectives[3]: First, it intends to simplify the previous system to make it more straightforward and intuitive. Second, it
intends to create a more “just” scheme wherein taxation is staggered and distributed on the basis of financial
capability and the underprivileged are able to reap more advantages. Third, it intends to improve the efficiency by
which tax is collected, particularly tackling issues of compliance.
The changes instituted by the tax reform is expected to be able to increase revenues to finance the infrastructure,
healthcare and education programs of the Duterte Administration [12] [1]. This is all while expecting to reduce tax
remitted by the poor and receiving a greater portion of revenues from the wealthiest in the population through
personal income tax (PIT) and consumption taxes. The tax received from the latter will also subsidize, through
unconditional cash transfers, the poorest 10 million households, who are not benefited by the greater take home pay
amendment.
On a long-term scale, TRAIN Act is just the first from a series of tax reforms, as part of the CTSP, which will be one
of the principal means by which the 2020 and 2040 vision of the incumbent administration is to be achieved. The
vision in 2020 is that poverty will be reduced from 21.6% to 14%, while 2040 sees the Philippine nation as having
“eradicated extreme poverty”, established “inclusive economic and political institutions where everyone has equal
opportunities” and achieved “high-income country status” [3]. This can be achieved if economic growth can be
sustained by at least 7% each year and if the source of growth can be shifted to investment from consumption. This
means prioritizing investments on people through "health, education, life-long training, social protection,
infrastructure, and research and development" and investments on infrastructure to boost productivity [13]

Effects of TRAIN Law[edit]

The three main categories the TRAIN Law affects with its first package are Growth in the Economy, Employment
Generation, and Effect on Inflation. The DOF projects the economy to grow by 1.3% by 2022 with a 0.42%
inflation due to the excise tax increase (this is still within the 2-4% target inflation by the Bangko Sentral ng Pilipinas
(BSP); it also predicts to create half a million jobs over the next ten years, and eight million over the entirety of its
life, as well as lift 250,000 Filipinos out of poverty. Through the increase in excise tax, Package 1 will be able to
generate Php134 Billion.[13]. The actual effects in 2018 are elaborated below.

Growth and Economy[edit]

For the first quarter of 2018, the government was able to raise Php619.84 billion. This represents a 16.4%
growth in revenue compared to the first quarter of 2017. In monetary terms, the government was able
to raisePhp87.44 billion more in this quarter of 2018 compared to the previous year. "The Philippine economy
expanded by 6.8 percent in the first quarter of 2018, making it still one of the fastest-growing economies in the
region even as rising inflation reduced consumption and productivity in some sectors."[7] DOF Secretary Carlos
Dominguez III claimed tax revenues grew by 18.2%, "exceeding the 9.7 percent nominal gross domestic product
(GDP) growth."[7]
Departments that saw immediate benefits from Package 1 include the Bureau of Internal Revenue and Bureau of
Customs, both with a 14.2% and 24.7% increase in revenue. This translates to a total of Php423.1 billion and
Php129.8 for both departments respectively. Other government departments were able to expand their investment
and growths during the first quarter as well due to the increase in income.
Insofar as expenditures go for the first quarter of 2018, the total amounted to Php782.0 billion, growing by 27.1%,
which also outstripped the 9.7% nominal GDP growth due to the estimated 40.0% increase in capital outlays.
Dominquez also said that the expenditure effort also rose by 2.73%, which is the highest increase since 2003. This
results in a larger contribution towards GDP growth. As such, revenue effort grew by 0.91%. In addition, public
construction expanded by 25.1%, thus boosting GDP growth by 0.4%. On the other hand, government consumption
increased by 13.6%, contributing an incremental 1.4% to the growth of the GDP."'Strong macroeconomic
fundamentals backed by tax reforms and the Build, build, build program will continue to boost economic growth to
the optimum 7-8 percent level as the competitiveness of the economy rises and more jobs are created,' he said."[7]

Inflation[edit]
"The inflation rate in June—which exceeded both government and market expectations—was the fastest pace in at
least five years. Year-to-date, inflation averaged 4.3 percent, above the BSP’s 2-4 percent target range."[8]"It
peaked at 5.2 percent for the same month. For the previous months, inflation was pegged at 4.6 percent and in the
same period in 2017, 2.5 percent."[35]
This was primarily due to the higher annual rate posted in the heavily-weighted food and non-alcoholic beverages
index at 6.1%. The country's food index went up by 5.8% in June 2018. It was 5.5% in the previous month and 3.1%
in June 2017. The following annual mark-ups were also observed for the following food groups

 Rice (4.7%)
The Tax Reform for Acceleration and Inclusion (TRAIN) Law or Republic Act No. 10963, is the initial package
of the Comprehensive Tax Reform Program (CTRP) that was signed into law by President Rodrigo Duterte on
December 19, 2017 [1]. TRAIN consists of revisions to the National Internal Revenue Code of 1997, or the Tax
Code [2]. This reform includes packages that make changes in taxation concerning the personal income tax (PIT)[3],
estate tax, donor’s tax, value added tax (VAT), documentary stamp tax (DST) and the excise tax of petroleum
products, automobiles, sweetened beverages, cosmetic procedures, coal, mining and tobacco [4].
The prominent feature of the tax reform is that people who earn P250,00 annually or P21,000 monthly and below
are exempted from paying personal income tax (PIT). This includes minimum wage earners, who were also
exempted in the former tax system. On the other hand, those earning over P250,000 have tax rates following a set
PIT schedule. Essentially, greater income is taxed at higher tax rates [5]. This denotes that low to middle income-
earners get to have a higher take home pay, while high income-earners have a bigger contribution to tax revenues.
Increase in consumption taxes intend to counterbalance PIT tax exemptions. [3]
The TRAIN LAW is one of the primary ways in which the 2020 and 2040 vision of the Duterte administration is to be
achieved [6], and so, it had optimistic projections about its effect on the economy, development and poverty
alleviation in its inception. Regardless, contentions about the passing of this law has been present since the
beginning and the subsequent reception by the people since its ratification has been controversial. In the first
quarter of 2018, both positive and negative outcomes have been observed. The economy saw an increase in tax
revenues, government expenditure and an incremental growth in GDP [7]. On the other hand, unprecedented
inflation rates that exceeded projected calculations[8], has been the cause for much uproar and objections. There
have been petitions to suspend and amend the law, so as to safeguard particular sectors from soaring prices.[9] [10][11]