Tax Reform Bill

TRAIN: Tax Reform for
Acceleration and INclusion

TARA: Tax Administration
Reform Act
DU30 Express - is anchored on a cohesive

roadmap to acceleration and inclusion. More
equal and more prosperous at home. More equal
abroad and at peace with our neighbors.
Sumlang Lake, Camalig, Albay
DU30 EXPRESS:
TARA SA TRAIN
Single Digit Poverty and New Middle Class, Golden
Age of Transportation and Science for Change
Tax Management Association of the Philippines, Inc.

General Membership Meeting
Makati Diamond Residences, Makati City
February 23, 2017
Rep. Joey Sarte Salceda

2nd District, Province of
Albay Philippines
SUMMARY
National Goals of Duterte Admin
Single digit poverty at 7.5% HH poverty by 2022, pop poverty at 15%
GDP at 9% by 2019 assuming global 2.5% soft landing from Trump
and China deceleration
GNI $12,000 per capita by 2030
3% deficit to GDP is sacred
TRAIN
P2.3trn from 1H17-2022
90% of net taxation on top 10%
P1.1bn (almost half) are tax savings to middle class
P58bn income transfers to low income class
Net P250bn for NG by 2019
P48bn for LGUs starting by 2021
TARA
0.4% of GDP rising to 0.8% but could be as high as 2%
3
I am confident that we will be able to
lift more of our people from poverty,
expand the economy by about 50% in
real terms, and make the Philippines
hopefully, I pray, an upper middle
class income economy in 2022.
- President Rodrigo Roa Duterte
4
5
ROE (in millions): Top 100 Listed Corporations
in millions
ROE net of Depreciation Income w/ Cash flow CFROE net
Aggregate common Aggregate 90-day T-
Year ROE (%) T-bill rate and Depreciation and ROE of T-bill
equity income bill rate (%)
(%) amortization Amortization (CFROE) rate (%)
2004 1,071,066 88,456 7.340 105,213 193,670
2005 1,074,527 148,198 13.8 6.358 7.5 103,510 251,708 23.5 16.0
2006 1,258,086 189,939 16.3 5.351 10.9 123,378 313,318 26.9 15.9
2007 1,534,505 249,333 17.9 3.406 14.5 150,844 400,177 28.7 14.2
2008 1,817,651 274,444 16.4 5.389 11.0 162,835 437,279 26.1 15.1
2009 1,751,276 229,258 12.8 4.186 8.7 136,809 366,067 20.5 11.9
2010 2,136,476 345,945 17.8 3.728 14.1 187,275 533,220 27.4 13.4
2011 2,514,717 435,045 18.7 1.371 17.3 204,307 639,352 27.5 10.2
2012 2,922,250 435,776 16.0 1.583 14.4 185,467 621,243 22.9 8.4
2013 3,356,359 496,120 15.8 0.315 15.5 216,353 712,473 22.7 7.2
2014 4,063,043 544,166 14.7 1.244 13.4 274,912 819,078 22.1 8.7
2015 4,579,715 566,399 13.1 1.772 11.3 290,559 856,958 19.8 8.5
2016 5,055,481 609,257 12.6 1.500 11.1 295,347 904,603 18.8 7.6
Total Profits w/
Change in Equity Total Profits Depreciation &
Amortization
3,984,415 4,612,336 7,049,144

6 Data source: Bloomberg and BSP (accessed 6 Feb 2017)
ROE of Public Listed Utilities
9-months Annualized 9-months Annualized end end
Public Listed Companies
RoE RoE Net Income Net Income Dec 2015 Sep 2016
Maynilad Water Services, Inc. 13% 17% 4,801.00 6,401.33 35,539.00 38,313.00
Manila Electric Company 21% 28% 15,676.00 20,901.33 80,276.00 68,907.00
Manila Water Company, Inc. 12% 16% 4,872.53 6,496.70 38,824.72 42,750.35
Globe Telecom, Inc. 19% 26% 11,716.15 15,621.54 62,220.93 59,392.03
PLDT, Inc. 15% 19% 15,865.00 21,153.33 104,531.00 113,608.00
Data Source: PhilEquity
7
The Philippines growth story:
(1) rising trajectory, (2) 17 years of uninterrupted expansion
GDP growth rates (in %, at constant prices)
4.5 6.2
10
2.8 2000-2009 2010-2015
2.0 1990-1999 GLORIA PNOY
1980-1989 RAMOS
8 fiscal reform good governance
CORY liberalization
6 democratization deregulation
demonopolization privatization
4
0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
-2
-4
-6
-8
-10
8 Source: Philippine Statistics Authority (PSA)

ADBs Asia 2050: Ph will be 2nd to last
The Philippines will be overtaken by India
and Viet Nam; will be in the company of
Mongolia and Cambodia.
107,600
Asia will nearly double its share of global

GDP to over 50%.
66,700
Asias per capita income will rise six-fold 47,800

41,700
from 2010 to 2050, higher than the global 37,400
33,800
26,900
average 22,900
22,700
7 economies will lead Asias march to

prosperity (South Korea, Japan, China,
India, Indonesia, Malaysia and Thailand)
Figure 3: Projections of Per Capita GDP (constant 2010 PPP) of Selected Asian Economies in 2050
Source of basic data: ADB Publication Asia 2050
9
Our vision: 4th after SK, Japan and China
South Japan China Philippines India Indonesia Vietnam Mongolia Cambodia

Korea
The Philippines can join Asias march to prosperity!

10
STRATEGIC GOALS
CURRENT FUTURE
Middle Income $1.2trn economy by
Country (2015) 2030 (OECD level)
#137 in GDP/capita #100 by 2022,
#159 in GHG/capita (2015) #80 by 2030
Poor (2012) or 7.5% or 2m families
4.4m families by 2022
Near poor (2012) 20% or 4.4m families
or 7.0m families by 2022
Increase in middle 4.84m families or
class families 15.2m by 2022
National Goals: more equal, more prosperous and more competitive

11
From vision to action
2035-
2029- 2040
2023- 2034
2028
2017-
2022 Requires strong ownership and buy-in by stakeholders and
the countrys leaders over the next 25 years
Each plan must build on previous plan, not change it
unnecessarily
Needs and preferences may change over time
Unexpected developments may arise (e.g. climate, science
& technology)
12
PHILIPPINE DEVELOPMENT PLAN UNDER DUTERTE 2040
FOUNDATION FOR INCLUSIVE GROWTH, A HIGH-TRUST SOCIETY AND

A GLOBALLY COMPETITIVE KNOWLEDGE ECONOMY 2022
REDUCING INEQUALITY INCREASING POTENTIAL GROWTH ENHANCING THE SOCIAL FABRIC
Promote technology
Expand Increase access adoption Build trust in
economic to economic Encourage innovation public
opportunities opportunities institutions
Promote competition
Strategic trade and fiscal policy and macroeconomic stability
Maximize demographic Promote and value

Accelerate Reduce cultural diversity
vulnerability of dividend
human capital
development the poor
Accelerated and strategic development

of infrastructure
Maintain ecological integrity, clean
and healthy environment Ensure security
13
Our National Goal: Single Digit Poverty
Strategic Goals
The Du30 goal is to reduce poverty by 9%, this results in a target of 7.5% or
single-digit household poverty by 2022, population poverty at 15%
Growth could go 9% (global 2.5%/China soft landing) but target 7.2% average
over next 6 years. For every 1% GDP, 0.3% poverty reduction.
Increase Infra/GDP from 5.2% (2016) to 6.5% (2022)
Absorptive Capacity
Full cabinet / NEDA Cabcom meet (weekly during Erap), not small groups, no silo thinking
Rapid capdev for IA Usecs/Asecs/Directors (DAP, NCPAG, AIM)
ROWA and EIA clear and simple regulations, LGU and community ownership
Traffic and Congestion Crisis Act: DREAM Plan for Greater Manila Area, Metro Cebu Urban
Transport Plan of Roadmap Study for Sustainable Urban Development for Metro Cebu
Infrastructure Mix
Golden Age of Transportation
New Masterplanned Cities like Clark Green City, Metro Lucena, Metro Legazpi, Metro Naga
Agricultural investments
Faster internet speed and coverage
PSA Amendment (HB 4468)
S/T, R/D and HEIs
Science for Change (No. 8 socioeconomic agenda)
SUCs Modernization
14
16.5 9 = 7.5
in 2022
15
Simulated GDP Growth Rate Assuming 3% to 5%
Expenditure on Infrastructure and other Capital Outlays
Lagged / Scenario Lagged Forecast Lagged Forecast Simulated
Forecast Value for Growth Rate for Growth Rate Annual GDP
Year Infrastructure Public Spending for GDCF Growth Rate
Spending (in % ) (in %) (in %) (in %)
2016 2.3 7.5 5.1 6.2
2017 2.1 1.3 14.1 4.9
2018 2.6 2.7 3.7 5.3
2019 3.0 6.3 -16.1 5.8
2019 3.5 6.3 -16.1 6.6
2019 4.0 6.3 -16.1 7.4
2019 4.5 6.3 -16.1 8.3
2019 5.0 6.3 -16.1 9.1
16 Source: Salceda,J.S. - Philippine Socio-Economic Prospects under the Duterte Administration
TAX REFORM
Its Tax/GDP, stupid. Study of Tabunda, Albert and Salceda [see next slide]
Fiscal Policy Logic
Shifting tax burden on (LOWER TAX RATES) to consumption (HIGHER EXCISE
TAXES). This encourages savings, thus investments.
Shift consumption to investments: 1% of GDP. 2/3 to Infra, 1/3 to Transfers.
Tax the rich, Benefit the poor: Progressive excise tax on petroleum will
finance income transfers to the affected lower income families.
Benefit first, Tax later: Investments in Public Goods. Reverse P1trn
underspending from 2010- 2016. K+12 fully funded (P78bn), free SUCs
(P8.3bn), universal Philhealth (P54bn) and free irrigation (P4bn) solely
financed by organic growth as new taxes yet to kick in
Shared burden, Shared benefits: Weakness is benefits to lower 50%
dependent on bureaucratic efficiency, benefits to upper 50% is assured via
automatic tax (withholding) reductions
RVAT reforms during PGMA provided shield against global economic
recession and increased structural resilience of the Philippines.
17
18

Best predictor of
economic growth
When TAXEFFORT is included in the fitted model, INFRAPCT becomes

insignificant as an explanatory variable, indicating that TAXEFFORT is a better
predictor of GDP growth rate than INFRAPCT. Other variables that were also
tried as explanatory variables but were not significant are: Debt-to-GDP
ratio; Debt-to-GDP ratio squared; Sum of Exports as % of GDP and Imports as
% of GDP, an indicator of openness to the global economy; Real effective
exchange rate, an indicator of external competitiveness.
19
From consumption to investments. From services to industry.
14.0 6.9% 8.0
6.9%
12.0
Demand Side Supply Side
7.0
6.2%
10.0 Ave. growth
6.0
8.0 6.2%
5.0 4.5%
Average growth (%)

Average growth (%)
6.0 4.5%
4.0
2.8%
4.0
2.8%
3.0
2.0
0.0 2.0
1990-1999 2000-2009 2010-2015 2016
-2.0 Consumption 1.0
Government
-4.0 0.0
Investment
1990-1999 2000-2009 2010-2015 2016
Net Exports
-6.0
Statistical discrepancy -1.0
Agriculture Industry Services
-8.0
20 Source: PSA
Investing in Education, Health, Infra and S4CP
Education Health Infrastructure Science for Change Program
Achieve 100% Upgrade 300 local Concretize 3,714 1. R&D to Address Health and Food Security
2. R&D for Productivity
enrollment hospitals km of national 3. R&D to Tap, Manage and Store Renewable
Build 6,793 new gravel roads, Energy Resources
and barangay and rural 4. R&D to Apply New Technology Across
completion 10,473 km of Sectors
health centers
national asphalt 5. Disaster Risk Reduction and Climate Change
rates Hire an additional 6. Maximize Utilization of R&D Results through
roads, and 30,209
Build 80,066 20,098 doctors, Technology Transfer and/or
4,560 nurses, and km of local gravel Commercialization
more roads
7. Assistance to the Production Sector
3,328 midwives 8. Upgrading of Facilities and Improvement Of
classrooms between 2017 and Irrigate 1.3 million S&T Services (Strengthening of R&D and S&T
Hire 157,412 2020 hectares of land Services in the Regions through
Infrastructure, facilities, HRD and R&D
more teachers Achieve 100% Provide 7,834 funding)
between 2017 PhilHealth isolated barangays 9. Human Resource Development for Science
and Technology
and 2010 coverage at higher and 23,293 isolated 10. Capacitate and Utilize Institutions in the
quality of services sitios with road Regions SUCs who do R&D and Develop
Human Resources in S&T
access 11. Collaboration with industry, academe and
international institutions
Source: 2013 DeEd MTEF, 2016 DOH draft MTEF, and World Bank estimates
21
Vision for the Philippines
22
23
24
25
26
27
Q3 2016 Average Internet Speed in Asia
28 Source: akamais [state of the internet] Q3 2016 report

In summary, tax reform is needed to
fund the ten-point socioeconomic agenda
29
Special Focus:
TRAIN: Tax Reforms for Acceleration and INclusion
30
High end revenue impact in 2018
Tax package (in billion pesos) Loss Gain Net
Package 1: PIT and consumption -139.6 302.2 162.5
Lower personal income tax rate -137.9
Estate and donor tax -1.7
VAT base expansion 92.5
Automobile excise 31.3
Excise tax on petroleum 120.9
Complementary revenues 57.4
Tax administration measures 44.2 44.2
Total 206.8
Tax package (% of GDP) Loss Gain Net
Package 1: PIT and consumption -0.8 1.7 0.9
Lower personal income tax rate -0.8
Estate and donor tax 0.0
VAT base expansion 0.5
Automobile excise 0.2
Excise tax on petroleum 0.7
Complementary revenues 0.3
Tax administration measures 0.3 0.3
Total 1.2
Note: 40% of the first year incremental revenue from oil or around 48 billion pesos will be earmarked to targeted transfers, pantawid
31 pasada and jeepney modernization, and the rest will be softly earmarked only to investment, education, health, and social protection.
Incremental revenues (in billion pesos)
2017 H2 2018 2019 2020 2021 2022
Tax policy 41.5 160.6 189.8 159.3 166.6 173.4
(% of GDP) 0.3 0.9 1 0.7 0.7 0.7
PIT -62.6 -139.9 -152 -208.4 -229.6 -253
Estate and donor tax -0.8 -1.7 -1.7 -1.7 -1.7 -1.7
VAT 26.5 92.5 102.5 113.6 126 139.4
Oil excise 36.1 120.9 147.2 156.9 167.6 178.7
Auto excise 14.8 31.4 33.3 35.3 37.4 39.6
Motor vehicle users charge 6.2 12.7 13.5 14.3 15.1 16
Sugar-sweetened beverage 21.3 44.7 47 49.3 51.8 54.4
Tax administration (Fuel marking, e-receipts,
48.1 44.2 58.2 70.4 84.4 100.9
POS connection, bank secrecy relaxation)
(% of GDP) 0.3 0.3 0.3 0.3 0.4 0.4
Total 89.6 204.8 248 229.7 251 274.3
(% of GDP) 0.6 1.2 1.3 1 1.1 1.1
32
Cumulative revenues (in billion pesos)
2017 H2 2018 2019 2020 2021 2022
Tax policy 41.5 202.1 391.9 551.2 717.8 891.2
PIT -62.6 -202.5 -354.5 -562.9 -792.5 -1043.5
Estate and donor tax -0.8 -2.5 -4.2 -5.9 -7.6 -9.3
VAT 26.5 119 221.5 335.1 461.1 600.5
Oil excise 36.1 157 304.2 461.1 628.7 807.4
Auto excise 14.8 46.2 79.5 114.8 152.2 191.8
Motor vehicle users charge 6.2 18.9 32.4 46.7 61.8 77.8
Sugar-sweetened beverage 21.3 66 113 162.3 214.1 268.5
Tax administration (Fuel marking,
e-receipts, POS connection, 48.1 92.8 139.8 189.1 240.9 295.3
bank secrecy relaxation)
Total 89.6 294.9 531.7 740.3 958.7 1186.5
33
THE GENESIS OF TRAIN
AEC integration
If PIT is lowered, but CIT not lowered,

corp will migrate to SEP
Slide
Slide
Next Slide
34
THE GENESIS OF TRAIN
35 back
Source: Department of Finance
36 back
TAX REFORM PROGRAM: Package 1
37
Proposed
Personal
Income Tax
System
38
P1.1 trillion Tax Savings for Employees
Estimated Revenue Loss from Personal Income Tax of the Revised Package 1
Details 2017 H2 2018 2019 2020 2021 2022 TOTAL
Personal Income Tax -62.6 -137.9 -152.0 -208.4 -229.6 -253.0 -1,043.5
Bracket and rate adjustment Schedule 1 rates: -63.5 -139.9 -154.2 -210.3 -231.7 -255.3
(with exemption for the first 82,000 pesos 2017 2nd half, 2018 & 2019
of the 13th month pay and other bonuses)
Schedule 2 rates:
2020 onwards
Reduce Optional Standard Deduction 0.7 1.6 1.8 1.8 1.9 2.1 9.8
(OSD) from 40% to 20% for individuals
Remove 15% rate for Regional Data to be provided by BIR 0.0 TBD TBD TBD TBD TBD -
Operating Headquarters (ROHQ)
Fringe benefits tax 30% from 2017 H2 to 2019; 0.2 0.4 0.5 0.2 0.2 0.2 1.7
include in taxable income
from 2020
Simplified tax for micro-sized firms Revenue neutral; proposed 0.0 0.0 0.0 0.0 0.0 0.0 -
Simplified income tax rate
of 8% on gross sales in lieu
of VAT or percentage tax
39
Effects of a Credit Downgrade
to the Economy
Additional debt servicing as a result of a credit rating downgrade (PHP billion)
Shock to foreign Shock to foreign
Scenarios Shock to interest rates Total
interest payments amortization payments
Base PHP 631 billion national USD 2.0 billion USD 1.7 billion
government gross financing foreign interest payment foreign amortization payment
average interest rate: 4% or PHP 94.2 billion or PHP 79.4 billion
[USD 1 = PHP 48]
1% increase in interest rates,
1-peso depreciation 6.3 2.0 1.7 9.9
Source: Department of Budget and Management, Budget of Expenditures and Sources of Financing FY 2017
40
Deficit % of GDP
2001 -3.8%
2002 -5.0%
Deficit % of GDP 2003 -4.4%
0.0%
2004 -3.7%
-1.0%
2005 -2.6%
2006 -1.0%
-2.0% 2007 -0.2%
2008 -0.9%
-3.0% 2009 -3.7%
2010 -3.5%
-4.0% 2011 -2.0%
2012 -2.3%
-5.0%
2013 -1.4%
2014 -0.6%
-6.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2015 -0.9%
2016 -2.1%E
41 2017 -2.7%E
Impact on Taxpayers Personal Income
42
43
44
45
46
47
Military and uniformed personnel shall likewise have reduced tax due.
Impact of year 1 proposal to monthly base pay: P16,934
Police Officer II annual basic salary: P203,208

with no dependent 13th month pay and other benefits: P55,802
Provisional allowance: P16,536
de minimis and other non-taxable income(PERA): P92,790
annual gross income: P368,336

mandatory contributions: P6,464
personal exemption: P50,000

NTI (present): P163,280
Tax Due (present): P28,320

NTI (proposal): P213,280
Tax Due (proposal): P0

Tax Savings: P28,320
48 Percent Increase/(Decrease) in tax due:(100%)
Military and uniformed personnel who are presently claiming 2 dependents
shall have reduced tax due in the proposed tax structure.
.
annual basic salary: P203,208
Police Officer
with 2 dependents
II 13th month pay and other benefits: P55,802
personal exemption and allowance for dependents: P100,000


Military and uniformed personnel who are presently claiming the maximum
4 dependents shall have reduced tax due in the proposed tax structure.
. monthly base pay: P16,934
Impact of year 1 proposal to
Police Officer II annual basic salary: P203,208

with 4 dependents 13th month pay and other benefits: P55,802


Tax Savings: P7,492
Military and uniformed personnel in the officer level shall also have reduced tax due.
Captain annual basic salary: P423,744

with no dependent 13th month pay and other benefits: P110,936
Provisional allowance and officers allowance: P163,824
personal exemption: P50,000
Tax Due (proposal): P80,695

Military and uniformed personnel in the officer level who are presently claiming 2
dependents shall have reduced tax due in the proposed tax structure.



Military and uniformed personnel officer level who are presently claiming the
maximum 4 dependents shall have reduced tax due in the proposed tax structure.



Personal Income Tax
(using 2018 salaries) by for government employees
Personal income tax 2018 income Current vs. DOF Personal income tax 2018 income Current vs. DOF
Basic monthly Basic monthly
Monthly Effective tax Monthly Effective tax
salary (in pesos) salary (in pesos)
Salary Typical government change in take rate of Salary Typical government change in take rate of
[based on the [based on the
Grade employee home pay (in proposal (in Grade employee home pay (in proposal (in
third tranche of 17 Postmaster IV third34,781
tranche of 31,636 4.4
pesos) percent) pesos) percent)
EO 201] EO 201]
18 Forester III 38,085 35,283 5.4
1 Laborer 10,510 0 0 1
19 Laborer Professor
Associate 10,510
42,099 0
37,828 0
7.0
2 Messenger 11,200 0 0 20 Rural Heath Physician 47,037 40,959 8.5
3 Clerk 1 and Driver 1 11,914 0 0 21 Attorney III 52,554 44,457 9.9
4 Mechanic 1 12,647 0 0 22 Assistant Division Chief 58,717 49,710 11.2
5 Carpenter II 13,481 0 0 23 Court Atty II 65,604 55,823 12.3
6 Electrician II 14,340 0 0 24 Division Chief 73,299 60,044 13.6
7 Secretary 1 15,254 7,099 0 25 Director I 82,439 62,362 15.1
8 Bookkeeper 16,282 8,798 0 26 Director III 92,108 64,814 16.3
9 Education Research Assistant 1 17,473 11,312 0 27 Director III 102,910 67,553 17.4
10 Nurse 1, Teacher 1 18,718 13,942 0 28 Director IV 114,981 70,614 18.4
11 Agriculturist I 20,179 17,002 0 29 Assistant Secretary 128,467 74,034 19.3
12 Engineer I 22,149 21,150 0 30 Undersecretary 143,534 77,855 20.1
13 Veterinarian I 24,224 25,256 0.3 31 Department Secretary 198,168 83,000 22.3
14 Legal Officer I 26,494 26,453 1.4 32 Vice-President 233,857 83,000 23.3
15 Admin Officer II 29,010 27,774 2.5 33 President 289,401 83,000 24.4
16 Dentist II 31,765 29,230 3.5 Source: DOF staff estimates
Note: Estimates use the assumption that each taxpayer has two dependents and
receives 13th and 14th month pay.
54
Monthly Personal Income Tax
(using 2018 salaries) by individual
Marginal tax rate
Personal income tax
(in percent) Current vs. DOF
Monthly Effective tax
Monthly average
Decile/ change in rate of
Typical Filipino individual individual wage Current Proposed
percentile take home proposal (in
(in pesos)
pay (in pesos) percent)
D1 Subsistence poor 1,000 0 0 0 0
D2 Subsistence poor 2,000 0 0 0 0
D3 Poor 3,000 0 0 0 0
D4 Near poor 4,000 0 0 0 0
D5 Near poor 5,000 0 0 0 0
D6 Informal worker 6,000 0 0 0 0
D7 Minimum wage worker 8,000 0 0 0 0
D8 Above minimum wage 12,000 0 0 0 0
D9 Professional 18,000 20 0 12,408 0
D10 Middle class 50,000 30 25 42,838 9.3
P100 Executive 150,000 32 30 79,495 20.4
T1000 CEO 400,000 32 32 83,000 25.7
Top taxpayer A 1,000,000 32 35 (145,083) 29.3
Top taxpayer B 1,500,000 32 35 (335,283) 30.1
Source: DOF staff estimates
Note: Assumes two dependents with 13th month pay. Incomes are net of mandatory contributions
55
Personal Income Tax
(using estimated and adjusted 2018 income) by household
Personal income tax (DOF proposal) 2018 projected monthly household (in pesos)
Net annual Effective tax rate
Decile/ Compensation Self-employed Other
Description Total income increase in take of proposal (in
percentile income income income
home pay percent)
D1 Subsistence poor 5,233 1,359 1,424 2,450 2 0.0
D2 Subsistence poor 8,362 3,277 2,037 3,049 86 0.0
D3 Poor 10,741 5,215 2,026 3,501 400 0.0
D4 Near poor 13,076 6,868 2,263 3,945 1,051 0.0
D5 Near poor 15,826 8,740 2,528 4,559 2,281 0.0
D6 Informal worker 19,375 10,887 3,016 5,472 3,924 0.0
D7 Minimum wage worker 24,502 13,965 3,724 6,813 7,364 0.2
D8 Above minimum wage 32,482 18,375 4,422 9,684 14,010 0.5
D9 Professional 47,424 26,757 6,411 14,255 26,774 1.8
D10 Middle class 112,781 54,820 19,618 38,342 56,187 7.7
P100 Executive 287,685 108,206 79,017 100,463 75,555 13.7
T1000 CEO 626,703 133,891 271,549 221,262 -34,637 18.6
Top taxpayer A 1,376,147 294,006 645,972 436,169 -325,459 29.0
Top taxpayer B 2,752,294 588,011 1,291,944 872,339 -862,156 37.8
Source: DOF staff estimates using preliminary 2015 Family Income and Expenditure Survey
& January 2016 Labor Force Survey
Note: Includes 13th month pay.
56
Gains from the lower PIT regime are more than enough to
offset additional expenses from higher oil prices, car loan
payments, and inflation.
30,128
} 12,687
57
Bonus Exemptions
58
Adjusting income brackets and rates
For EQUITY and PROGRESSIVITY
1. Basic subsistence income of 250K, exempt
2. Wider bracket to subject low and middle-
income group at lower tax rates
3. Increased tax rate on high-income individuals
from 32% to 35% (income of 5M and up
Leveling the playing field
for EQUITY and SIMPLIFICATION
1. Unified exemption base of 250K regardless of civil status and
number of dependents.
2. Unified taxation of all business income regardless of form of
business (whether as self-employed or as corporation)
3. Unified taxation for all transfers of property regardless of the
mode of transfer, whether by sale, donation or by inheritance
4. Unified taxation on all income derived from employment,
whether it be salary or fringe benefit or whatever name
designated
Special Focus:
TRAIN: Excise Tax on Petroleum
61
Excise Tax to GDP
4.00
3.50
3.00
Total Excise Tax
2.50
2.00
Sin Tax effect
1.50
Oil Excise Tax
1.00
0.50
0.00
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2013 2014 2015
62
Oil Excise Tax to GDP Oil Excise Tax
Year
to GDP (%)
2.00 1997 1.21
1.80 1998 1.04
1.74 1999 0.92
1.60 2000 0.79
1.40 2001 0.63
2002 0.52
1.20 1.25 1.21 2003 0.47
1.00 2004 0.36
2005 0.33
0.80 2006 0.21
0.60 2007 0.15
2008 0.15
0.40 2009 0.13
0.20 2010 0.09 0.09
2013 0.07
0.00 2014 0.07
1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2013 2014 2015
2015 0.09
63
Why do we need to increase oil excise?
64
Why do we need to increase oil excise?
65
Table 1. Exciseson petroleum productssignificantly eroded in real termssince 1997.
(Nominal rates) (1997=100)
Excise (PHP/ liter) 1997 2006 change 2013 change
Lubricating oils/ greases 4.50 4.50 0.00 2.12 (2.38)
Processed gas 0.05 0.05 0.00 0.02 (0.03)
Denatured alcohol 0.05 0.05 0.00 0.02 (0.03)
Naphtha 4.80 4.35 (0.45) 2.05 (2.75)
Regular gasoline 4.80 4.35 (0.45) 2.05 (2.75)
Leaded premium gas 5.35 5.35 0.00 2.53 (2.82)
Unleaded premium gas 4.35 4.35 0.00 2.05 (2.30)
Aviation turbo jet fuel 3.67 3.67 0.00 1.73 (1.94)
Kerosene 0.60 0.00 (0.60) 0.00 (0.60)
Diesel fuel oil 1.63 0.00 (1.63) 0.00 (1.63)
LPG 0.00 0.00 0.00 0.00 0.00
Asphalts(per kg) 0.56 0.56 0.00 0.26 (0.30)
Bunker fuel oil 0.30 0.00 (0.30) 0.00 (0.30)
Source: Republic Acts8424 and 9337
66 Source: World Bank Staff Estimates
Table 2. Average pre-tax retail prices(i.e., net retail price) of gasoline and diesel
increased six-fold since 1997 while excise tax ratesremained stagnant or were reduced.
Increase
(in PHP per liter) 1997 2014 (in percent)
Retail salesprice
Premium Unleaded 11.6 51.4 344
Regular Unleaded 10.5 50.1 379
Diesel 8.0 41.0 411
Average 10.0 47.5 374
Net retail price + excise

Diesel 8.0 36.6 357
Average 10.0 42.4 323
Net retail price

Diesel 6.4 36.6 473
Average 6.4 39.5 515
Source: Department of Energy (DOE), World Bank staff estimates
67
Oil excise tax: not increased since 1997 despite high progressivity
Fuel and lubricant expenditure
Of 20 million households, the top 2 million households by income decile
(richest 10%) consume almost 60 percent of petroleum 45
40
57.5%
products and commuting cost 35

30
The richest 200,000 households (richest 1%) consume
PHPbillion
25
20 percent of petroleum products and commuting cost. 20

15
14.9%
Retail sales prices and excise rates of selected products 10 9.9%
60 6.2%
5 4.3%
2.1% 3.0%
Aviation turbo RSP 0.2% 0.7% 1.2%
-
Premium unleaded RSP 1 2 3 4 5 6 7 8 9 10
50 National Income Decile
Regular unleaded RSP
Kerosene RSP Source: Family Income and Expenditure Survey (FIES) 2012, WB staff estimates
40 Diesel RSP Fuel and lubricant expenditure

PHP per liter
Aviation turbo excise (top income decile)

16
Premium unleaded excise 20.4%
30 14
Regular unleaded excise
12
PHPbillion
10
20
8 9.4%
6
10 4.8% 5.2%
4
3.4% 4.0%
2.7% 3.1%
2 1.9% 2.5%
- -
91 92 93 94 95 96 97 98 99 100
National Income Percentile
2/27/2017
Source: Department of Energy, WB staff estimates DEPARTMENT OF FINANCE Source: FIES 2012, WB staff estimates 68
68
What is Excise Tax?
69
Figure 3. Philippine premium unleaded gasoline excise tax relative to retail price isvery low by
international standards
70
Figure 4. Thisisespecially true for diesel, which istotally exempt from excise tax.
71
Oil Excise Rates
72
Oil Excise Rates
Excise rates
Pesos per liter 2017 H1 2017 H2 2018 2019 2020
Diesel and essentials 0.00 3.00 5.00 6.00 6.24
Gas and
4.35 7.00 9.00 10.00 10.40
nonessentials
Annual indexation of 4% starting 2020, except if Dubai crude exceeds $100/barrel
Pump price (USD 53.72 per barrel)

Pesos per liter 2017 H1 2017 H2 2018 2019 2020
Diesel 32 35 37 38 38.24
Gas 46 53 55 56 56.40
73
Excise Tax on Petroleum
Petroleum excise
2018 projected Net annual

Effective tax rate
Decile/ monthly change in
Description of proposal (in
percentile household take home
percent)
total income pay
D1 Subsistence poor 5,233 (160) 0.2

D2 Subsistence poor 8,362 (251) 0.3
D3 Poor 10,741 (339) 0.3
D4 Near poor 13,076 (427) 0.3
D5 Near poor 15,826 (557) 0.3
D6 Informal worker 19,375 (695) 0.3
D7 Minimum wage worker 24,502 (904) 0.3
D8 Above minimum wage 32,482 (1,183) 0.3
D9 Professional 47,424 (1,673) 0.3
D10 Middle class 112,781 (4,316) 0.3
P100 Executive 287,685 (9,150) 0.3
T1000 CEO 626,703 (10,674) 0.2
Top taxpayer A 1,376,147 (23,438) 0.2
Top taxpayer B 2,752,294 (46,876) 0.2
Elasticity: -0.30
74
Inflation remains low and stable
despite significant increase in diesel prices
December 2016 year-on-year
inflation rates
80 75.9
60
40
20
2.6 3.6 1.9 1.3
0
Diesel* Inflation Food Transport Electricity,
Gas,
Source: DOE, PSA
Housing,
*January y-o-y change in diesel price Water
Jan 25-29 2016: 18.25
Jan 29 2017: 32.10
75
Special Focus:
TRAIN: VAT Exemption Reduction
76
Ano ang Value-Added Tax?
77
Value-Added Tax Reforms
78
VAT: 60 lines of exemptions that lead to large leakages
Examples of VAT-exempt transactions
agricultural and marine food wearing apparel, and in good standing with the are not VAT-registered; Sale or lease of goods or
products in their original Cooperative Development properties or the
state domestic animals, Authority (CDA) to their Sale of real properties not performance of services
members, as well as of their primarily held for sale to other than the transactions
livestock and poultry of a Services by agricultural produce, whether in its customers or held for lease in mentioned in the preceding
kind generally used as, or contract growers and milling original state or processed the ordinary course of trade paragraphs, the gross annual
yielding or producing foods for others of palay into rice, or business;
form, to non-members, sales and/or receipts do not
for human consumption; corn into grits, and sugar exceed the amount of One
cane into raw sugar; Sale of real properties utilized Million Five Hundred
and breeding stock and their importation of direct for low-cost housing as
farm inputs, Thousand Pesos
genetic materials thereof; Services rendered by regional defined by RA No. 7279, and (P1,500,000.00)
or area headquarters other related laws
fertilizers; machineries and equipment,
established in the Philippines Importation of fuel, goods
including spare parts thereof, Sale of real properties utilized
seeds, seedlings and by multinational corporations and supplies engaged in
to be used directly and for specialized housing as international shipping or air
fingerlings; which act as supervisory,
exclusively in the production defined under RA No. 7279, transport operations;
communications and
coordinating centers for their and/or processing of their and other related laws
fish, prawn, livestock and wherein price ceiling per unit
poultry feeds, affiliates, subsidiaries or produce; Services subject to
is P225,000.00 percentage tax under Title V
branches in the Asia Pacific
ingredients, whether locally Region and do not earn or Gross receipts from lending of the Code, as amended;
Sale of residential lot valued
produced or imported, used derive income from the activities by credit or multi- at One Million Five Hundred
in the manufacture of purpose cooperatives duly Services of banks, non-bank
Philippines; Thousand Pesos
finished feeds registered and in good financial intermediaries
(P1,500,000.00) and below, performing quasi-banking
Transactions which are standing with the or house and lot and other
Importation of personal and Cooperative Development functions, and other non-
household effects belonging exempt under international residential dwellings valued bank financial intermediaries,
agreements to which the Authority; at Two Million Five Hundred
to residents of the Philippines such as money changers and
returning from abroad and Philippines is a signatory or Thousand Pesos pawnshops
Sales by non-agricultural,
non-resident citizens coming under special laws except (P2,500,000.00) and below
non-electric and non-credit
to resettle in the Philippines those granted under P.D. No. where the instrument of
cooperatives duly registered
529 sale/ transfer/ disposition
with and in good standing
Importation of professional with CDA; was executed on or after July
instruments and implements, Sales by agricultural 1, 2005;
cooperatives duly registered Export sales by persons who
79
Value-added tax: many zero-ratings that lead
to large leakages since refunds are not provided
Examples of VAT zero-rated transactions
The sale and actual shipment export-oriented enterprise other than that mentioned in the Philippines or to a non- receipts of international air
of goods from the Philippines whose export sales exceed 70 this paragraph, such portion of resident person not engaged in carriers doing business in the
to a foreign country, percent of total annual fuel, goods and supplies shall business who is outside the Philippines and international
irrespective of any shipping production; be subject to 10 percent VAT Philippines when the services sea carriers doing business in
arrangement that may be are performed, the the Philippines are still liable to
agreed upon which may iv) Sale of gold to the BSP; i) The sale to a non-resident of consideration for which is paid a percentage tax of 3 percent
influence or determine the goods, except those mentioned for in acceptable currency and based on their gross receipts as
transfer of ownership of the v) Transactions considered in Sections. 149 and 150 of the accounted for in accordance provided for in Sec. 118 of the
goods so exported, paid for in export sales under Executive Tax Code, assembled or with the rules and regulations Tax Code but shall not be liable
Order No. 226, otherwise manufactured in the
acceptable foreign currency or of the BSP; to VAT
its equivalent in goods or known as the Omnibus Philippines for delivery to a
Investments Code of 1987, and resident in the Philippines, paid Services rendered to persons or Services to persons engaged in
services, and accounted for in entities whose exemption international shipping or air
other special laws; and for in acceptable foreign
accordance with the rules and under special laws or transport operations, including
regulations of the (BSP); currency and accounted for in
vi) The sale of goods, supplies, accordance with the rules and international agreements to leases of property for use
ii) The sale of raw materials equipment and fuel to persons regulations of the BSP which the Philippines is a thereof; provided that the
or packaging materials to a engaged in international signatory effectively subjects services referred to herein shall
shipping or international air Processing, manufacturing or the supply of such services to not pertain to those made to
non-resident buyer for delivery repacking goods for other
to a resident local export- transport operations; provided, zero percent rate; common carriers by air and se
that the same is limited to persons doing business outside relative to their transport of
oriented enterprise to be used the Philippines, which goods Services performed by
in manufacturing, processing, goods, supplies, equipment subcontractors and/or passengers, goods or cargoes
and fuel pertaining to or are subsequently exported, form one place in the
packing or repacking in the where the services are paid for contractors in processing,
Philippines of the said buyers attributable to the transport of converting, or manufacturing Philippines to another place in
goods and passengers from a in acceptable foreign currency the Philippines
goods, paid for in acceptable and accounted for in goods for an enterprise whose
foreign currency, and port in the Philippines directly export sales exceed 70 percent
to a foreign port without accordance with the rules and
accounted for in accordance regulations of the BSP; of the total annual production;
docking or stopping at any
with the rules and regulations Transport of passengers and
of the BSP; other port in the Philippines; Services other than processing,
provided further, that if any manufacturing or repacking cargo by domestic air or sea
iii) The sale of raw materials or portion of such fuel, goods or rendered to a person engaged carriers from the Philippines to
packaging materials to an supplies is used for purposes in business conducted outside a foreign country. Gross
80
VAT Comparison with other Countries
81
VAT Zero Rating
82
Current VAT coverage
VAT rates Base
12%
0% Export sales [and its inputs]
Exempt Agricultural and marine products in their original state such as vegetables, meat,
transactions fish, fruits, eggs and rice.
[Lease of residential houses not exceeding PhP 12,800 monthly. Purchase of
residential lots valued at PhP 1,919,500.00 and below and of residential dwellings
valued at PhP 3,199,200.00.]
Educational services rendered by both public and private educational institutions.
Medical, dental, hospital and veterinary services except rendered by professionals.
Services of bank and non-bank financial intermediaries
Services subject to Percentage Tax
[Books, newspapers and magazines.]
Sales of persons and establishments earning not more than PhP 1.5 million
annually, which could include sari-sari stores, carinderias and street vendors.
[Purchases of senior citizens, persons with disabilities (PWDs), cooperatives, Boys
83
Scouts and Girls Scout of the Philippines]
VAT Exemptions of Cooperatives
84
VAT Exemptions
85
Expanding the VAT base by limiting exemptions
The following exemptions will be removed, unless sold by firms whose gross sales fall
below the VAT threshold:
Exemptions found in special laws, except senior citizens and PWDs.
Cooperatives, except those selling raw agriculture produce.
Low cost and socialized housing.
Lease of residential units.
Power transmission (replace the franchise tax with VAT).
Domestic shipping importation.
Boy scouts and girl scouts.
Limit the VAT zero-rating to direct exporters who actually export goods out of the
country. This will be implemented together with the VAT refund starting in 2018.
Remove the following zero-ratings:
Indirect exporters and agents.
Move renewable energy from zero-rated to exempt.
Low-income and vulnerable households will be protected through a higher VAT
threshold of 3 million pesos (i.e., business with gross sales below 3 million pesos, such
as sari-sari stores, will be exempt from VAT) and targeted transfers to poor and
vulnerable households
86
Illusory VAT Exemptions
87
VAT Base Broadening
Value-added tax
Net annual
Decile/ monthly increase in Effective tax rate
increase in
Description of proposal with
percentile household take home pay take home
pay with BC (in percent)
total income without BC
BC
D1 Subsistence poor 5,233 (952) (374) 0.8
D2 Subsistence poor 8,362 (1,189) (438) 0.8
D3 Poor 10,741 (1,401) (502) 0.8
D4 Near poor 13,076 (1,657) (601) 0.8
D5 Near poor 15,826 (2,059) (766) 0.8
D6 Informal worker 19,375 (2,499) (1,025) 0.9
D7 Minimum wage worker 24,502 (3,497) (1,981) 1.3
D8 Above minimum wage 32,482 (5,407) (3,930) 2.1
D9 Professional 47,424 (7,463) (6,090) 3.0
D10 Middle class 112,781 (13,652) (12,011) 3.9
P100 Executive 287,685 (26,670) (23,288) 3.3
T1000 CEO 626,703 (35,896) (30,821) 2.2
Top taxpayer A 1,376,147 (67,679) (67,679) 2.2
Top taxpayer B 2,752,294 (135,358) (135,358) 2.2
The behavioral changes (BC) correspond to the assumptions made regarding the change in preference of
consumers once their source of goods that were once VAT-exempt becomes vatable.
For example, a consumer from decile 7 who buys from a cooperative which is VAT-exempt under the current
system will reduce his current consumption from 30% to 10% of his total consumption under the proposed
VAT base expansion, where cooperatives are no longer VAT-exempt.
88 Note: The poor can pay less VAT by shifting purchases to marginal stores.
Micro Businesses
89
VAT on Money Transfer
Domestic Remittance Rates with the proposed VAT
800
Average rate Proposed VAT

700
77
600
66
500 56
PHP
400 45
36
300
30
200
21
17 18 19
17
15
100 11 12
8 9
4 6
2 2 2 2 3 3
0 0 0 1 1
Sources: Cebuana Lhuillier, DOF staff estimates Remittance amount

90
International Remittance Rates with the proposed VAT
1,600
1,400
Average rate Proposed VAT
144
1,200
1,000
108
PHP
800
72
600 1,200
60
900
400
600
500
200
Sources: Cebuana Lhuillier, DOF staff estimates Remittance amount

91
Annual
Additional fee
Average Average
due to removal HH with Average
Decile Domestic International Average Domestic Total Tax existing Aggregate Domestic Aggregate International
of VAT remittance International
remittance remittance
excemption
1 11,577 1,183 90 1,874,521 1,700,731 173,790 169,156,775.04 153,473,979.99 15,682,795.05
2 15,231 2,745 105 1,874,785 1,588,499 286,286 197,527,347.60 167,364,209.57 30,163,138.03
3 15,971 4,769 105 1,831,123 1,410,071 421,052 192,927,119.28 148,565,044.46 44,362,074.82
4 16,639 7,739 117 1,818,771 1,241,387 577,384 213,450,964.56 145,689,170.54 67,761,794.02
5 17,270 12,663 153 1,801,607 1,039,447 762,160 276,294,449.52 159,409,519.37 116,884,930.15
6 18,032 19,817 153 1,788,195 851,931 936,264 274,237,585.20 130,652,121.23 143,585,463.97
7 17,290 31,248 153 1,685,052 600,242 1,084,810 258,419,574.72 92,053,122.23 166,366,452.49
8 17,936 54,182 153 1,647,101 409,640 1,237,461 252,599,409.36 62,822,360.66 189,777,048.70
9 18,978 79,212 153 1,575,013 304,416 1,270,597 241,543,993.68 46,685,221.63 194,858,772.05
10 22,048 177,649 164 1,444,021 159,430 1,284,591 236,703,922.32 26,133,833.15 210,570,089.17
Total 16,928 35,271 153 17,340,189 5,623,378 11,716,811 2,659,291,385.04 862,401,282.90 1,796,890,102.14
92
Special Focus:
TRAIN: Ad Valorem Excise Tax on Car Sales
93
94
95
Behavioral Assumption on Car Purchases
Automobile excise bracket Years to
Income Decile
1 2 3 4 replace car
D1 0.0% 0.0% 0.0% 0.0% 10
D2 0.0% 0.0% 0.0% 0.0% 10
D3 0.0% 0.0% 0.0% 0.0% 10
D4 0.0% 0.0% 0.0% 0.0% 10
D5 0.0% 0.0% 0.0% 0.0% 10
D6 0.0% 0.0% 0.0% 0.0% 10
D7 5.0% 1.5% 0.0% 0.0% 10
D8 12.5% 1.5% 0.0% 0.0% 8
D9 48.0% 1.5% 0.5% 0.0% 5
D10 60.0% 30.0% 5.0% 5.0% 4
P100 3.0% 60.0% 30.0% 7.0% 3
T1000 0.0% 0.0% 50.0% 50.0% 2
96
Top 5 taxpayers 0.0% 0.0% 0.0% 100.0% 1
Automobile Excise Rates
97
Net Manufacturing / Average Average
Current Proposed
Importation Price Effective Effective
(in pesos) (in pesos)
(in pesos) Tax Rate Tax Rate
Up to 600,000 2% 2% 4% 4%
Over 600,000 12,000 + 20% 24,000 + 40%

5% 11%
to 1.1 Million in excess of 600,000 in excess of 600,000
Over 1.1 M to 112,000 + 40% 224,000 + 100%
13% 23%
2.1 M in excess of 1.1 M in excess of 1.1 M
512,000 + 60% 1,224,000 + 200%
Over 2.1 M 31% 41%
in excess of 2.1 M in excess of 2.1 M
98
99
100
Excise on Automobiles
Automobile tax

Effective tax rate
Decile/ monthly increase in
Description of proposal (in Car purchased
percentile household take home
percent)
total income pay
D1 Subsistence poor 5,233

D2 Subsistence poor 8,362
D3 Poor 10,741
D4 Near poor 13,076
D5 Near poor 15,826
D6 Informal worker 19,375
D7 Minimum wage worker 24,502
D8 Above minimum wage 32,482
D9 Professional 47,424 (1,701) 1.9 Toyota Vios 1.3 J MT 2016
D10 Middle class 112,781 (9,029) 2.0 Toyota Corolla Altis 1.6 E M/T
P100 Executive 287,685 (27,710) 2.2 Toyota Corolla Altis 2.0 V A/T WP
T1000 CEO 626,703 (177,841) 5.7 Toyota Fortuner 4x4 V 2.8 Dsl A/T
Top taxpayer A 1,376,147 (517,932) 10.1 Mercedes Benz C 450 AMG 4MATIC
Top taxpayer B 2,752,294 (517,932) 5.0 Mercedes Benz C 450 AMG 4MATIC
Source: DOF staff estimates
**Automobile excise tax impact were computed using 2016 prices
101
Special Focus:
TRAIN: Net Impacts including Transfers
102
INCOME TRANSFER
Around 40% of incremental revenues from oil will be spent for the transfers
*Numbers do not add up due to rounding

103
Combined Tax Impact by Household
Combined effect Package 1 change in annual take home pay (in pesos)
2018 projected
Value- Change in
Decile/ monthly Personal Petrol and Net tax Inflationary
Description added Automobile** take home
percentile household income tax transportation due effect***
tax pay
total income*
D1 Subsistence poor 5,233 2 (374) (160) (532) (522) (1,054)
D2 Subsistence poor 8,362 86 (438) (251) (603) (797) (1,400)
D3 Poor 10,741 400 (502) (339) (441) (950) (1,391)
D4 Near poor 13,076 1,051 (601) (427) 23 (1,093) (1,070)
D5 Near poor 15,826 2,281 (766) (557) 958 (1,263) (305)
D6 Informal worker 19,375 3,924 (1,025) (695) 2,204 (1,434) 771
D7 Minimum wage worker 24,502 7,364 (1,981) (904) 4,479 (1,667) 2,811
D8 Above minimum wage 32,482 14,010 (3,930) (1,183) 8,898 (1,988) 6,910
D9 Professional 47,424 26,774 (6,090) (1,673) (1,701) 17,310 (2,458) 14,852
D10 Middle class 112,781 56,187 (12,011) (4,316) (9,029) 30,831 (4,316) 26,515
P100 Executive 287,685 75,555 (23,288) (9,150) (27,710) 15,406 (6,382) 9,024
T1000 CEO 626,703 (34,637) (30,821) (10,674) (177,841) (253,973) (8,022) (261,995)
Top taxpayer A 1,376,147 (325,459) (67,679) (23,438) (517,932) (934,507) (14,720) (949,227)
Top taxpayer B 2,752,294 (862,156) (135,358) (46,876) (517,932) (1,562,321) (22,080) (1,584,401)
Source: DOF staff estimates using 2015 Family Income and Expenditure Survey
Notes:
Each household has about two income earners
* Total household income includes compensation income, income from entrepreneurial activities (i.e. businesses), and other sources of income (i.e. cash transfers)
104 ***The inflationary effect was computed as a function of income, MPC, and estimates on the price effect of the increased oil excise on food.
Protecting the Poor, Investing in the People
A highly targeted transfer Conditional cash transfer The unconditional cash

program is more like the 4Ps to make the transfer (UCT) program is a
transparent, accountable, poor healthier and more time-bound means to
and direct way to protect the educated to take on better mitigate initial shock of the
poor and vulnerable. jobs or livelihoods. increase in petroleum
On the other hand, tax excises to allow people to
exemptions and blind continue spending normally
subsidies are inefficient and Transfer programs have good while adjusting smoothly to
cause large leakages. multiplier effects: 1.34 to new price regimes.
2.52.
Over time, it can be used to
provide rapid emergency
cash relief in times of
disaster.
105
Proposed Layered Social Protection Program
to mitigate effect of tax reform on poor and vulnerable
Rapid emergency/disaster
relief (when needed)
Non-CCT Non-CCT Non-CCT commuting No targeted transfer;
beneficiaries beneficiaries class already benefiting
UCT P300/month for UCT P300/month for Indirect transfers to from lower personal
1 year 1 year public vehicles income taxes
(Pantawid Pasada &
CCT beneficiaries jeepney
modernization) to
Top up in existing offset increase in
benefits P300/month fares (around
P1500/year for 1
year per household)
Covered by DSWDs Listahanan 2015
0 25 50 75 100
Percentile of households Amounts are indicative and depend on actual collection
106
Profile of Poor Households: Impact of 4Ps
4 out of 10
4Ps 4 out of 10 6 out of 10 5 out of 10 have
LISTAHANAN have outer have have Access Sanitary
1 walls made of Safe Water to Electricity Toilet
(2011) Light Materials Source Facility
4Ps 5 out of 10 6 out of 10 6 out of 10 6 out of 10

LISTAHANAN have outer have have Access have
2 walls made of Safe Water to Electricity Sanitary
(2015) Light Materials Source Toilet
Facility
Combined Tax-Transfer Effect
Targeted transfers will be crucial in protecting the poor from
shocks and can help improve the progressivity of the tax reform
Combined effect Package 1 change in annual take home pay (in pesos)
2018 projected Change in

Value- Change in Transfer
Decile/ monthly Personal Petrol and Net tax Inflationary take home
Description added Automobile** take home (full
percentile household income tax transportation due effect*** pay after
tax pay year)
total income* transfer
D1 Subsistence poor 5,233 2 (374) (160) (532) (522) (1,054) 3,600 2,546
D2 Subsistence poor 8,362 86 (438) (251) (603) (797) (1,400) 3,600 2,200
D3 Poor 10,741 400 (502) (339) (441) (950) (1,391) 3,600 2,209
D4 Near poor 13,076 1,051 (601) (427) 23 (1,093) (1,070) 3,600 2,530
D5 Near poor 15,826 2,281 (766) (557) 958 (1,263) (305) 3,600 3,295
D6 Informal worker 19,375 3,924 (1,025) (695) 2,204 (1,434) 771 1,500 2,271
D7 Minimum wage worker 24,502 7,364 (1,981) (904) 4,479 (1,667) 2,811 1,500 4,311
D8 Above minimum wage 32,482 14,010 (3,930) (1,183) 8,898 (1,988) 6,910 1,500 8,410
D9 Professional 47,424 26,774 (6,090) (1,673) (1,701) 17,310 (2,458) 14,852 14,852
D10 Middle class 112,781 56,187 (12,011) (4,316) (9,029) 30,831 (4,316) 26,515 26,515
P100 Executive 287,685 75,555 (23,288) (9,150) (27,710) 15,406 (6,382) 9,024 9,024
T1000 CEO 626,703 (34,637) (30,821) (10,674) (177,841) (253,973) (8,022) (261,995) (261,995)
Top taxpayer A 1,376,147 (325,459) (67,679) (23,438) (517,932) (934,507) (14,720) (949,227) (949,227)
Top taxpayer B 2,752,294 (862,156) (135,358) (46,876) (517,932) (1,562,321) (22,080) (1,584,401) (1,584,401)
Source: DOF staff estimates using 2015 Family Income and Expenditure Survey
Notes:
Each household has about two income earners
* Total household income includes compensation income, income from entrepreneurial activities (i.e. businesses), and other sources of income (i.e. cash transfers)
108 ***The inflationary effect was computed as a function of income, MPC, and estimates on the price effect of the increased oil excise on food.
The richest 10% will pay more
than the poorest deciles combined
Increase in VAT payment by decile Increase in oil expenditure by
(in pesos, annually) decile (in pesos, annually)
12,011
12,000 5,000
4,516
4,316
10,000 9,616
4,000
8,000
3,000
6,090
6,000
2,000 1,673
4,000
1,000
2,000
0 0
D1-D8 D9 D10 D1-8 D9 D10
Note: D1 refers to the first decile or the poorest 10% of households based on the preliminary 2015 Family Income and
Expenditure Survey (FIES). Each succeeding decile consists of the next 10% of households based on total household income.
109
After the tax-transfer reform,
the poor benefits the most
% Increase in Household Income
5% 4.1%
3% 2.6%
2.2% 2.2% 2.0%
1.7% 1.6% 1.7% 1.5%
1.0%
1% 0.3%
-1%
-3%
-3.5%
-5%
-4.8%
-5.7%
-7%
110 *based on FIES 2015 data

Income inequality under Tax Reform Package 1
improves compared to other proposals
Gini of Tax Reform Proposals
49
48.5
48 47.7
47
46.6
46.1 46.1
46
45
44
Base case High case w/o High case Alternate case 1 Alternate case 2
transfer w/transfer
111
112 Source: Computed using FIES and DoF data
Source: Calculated using FIES 2012
115
Source: Calculated using APIS 2013
116
Special Focus:
TRAIN: Macroeconomic Implications
117
Price Effect of Excise on Inflation
2017 H2 to 2018 (maximum effect)
Share of Net impact of excise to prices (%)2,3
Share of CPI petroleum Inflation
Commodity
CPI (%) 2015 products as rate (%)4,5
input (%) 1 Diesel Gasoline LPG Kerosene
Food 36 159 10 1.9 1.2 1.1 1.4 1.6

Transportation 6 129 30 5.7 3.5 3.4 4.2 4.8
Electricity 7 131 7 1.3 0.8 0.8 1.0 1.1
Others 51 131 6 1.2 0.7 0.7 0.9 1.0
Total 100 141 1.5
Notes:
1. Transportation share is the daily average of jeepney and bus operation in Metro Manila based on the National Tax Research Center computation.
Electricity share is based on the Department of Energy power statistics. Diesel 18.6%
Gasoline 11.2%
2. The net impact of the excise is obtained by multiplying the share of oil as input and the price increase as a result of the excise. LPG 10.5%
3. Below is the increase in the price of the petro products as a result of an increase in excise tax using the prevailing Kerosene 13.3%
petro prices in Metro Manila as of Dec. 13 Diesel 64.5%
4. Weighted net impact of the increase in excise tax on each commodity computed based on weights below using HECS 2011 Gas 29.4%
LPG 4.7%
5. Overall inflation computed from the weighted average of commodity inflation based on the share of CPI Kerosene 1.3%
118
Notes on DSGE
DSGE stands for Dynamic Stochastic General Equilibrium:
Dynamic: the model deals with economic variables that evolve
over time.
Stochastic: the model deals with random shocks that affect
these variables.
General Equilibrium: these variables are assumed to eventually
achieve a state of general equilibrium.
DSGE is used to analyze the long-term impact of the tax
reform package on the economy.
DSGE simulates over several time periods while the
older/simpler Computable General Equilibrium (CGE) model
simulates for only one time period.
The simulations are performed using MATLAB.
119
Fiscal Policy Summary
Capital: CIT, CaIT,
Labor: PIT Consumption: VAT, sugar, tobacco,
RPT
alcohol, and oil excises
Lump sum and others Education
Tax-financing
Tariffs Health
Consumption
Social services
Fiscal policy Investment
Infrastructure
Transfers (e.g., CCT)

Debt-financing
Local borrowings Foreign borrowings

120
Fiscal Policy Impact
External economy
Current account balance, gross international reserves,

Tax-financing
foreign direct investments, and portfolio investments
Real economy
Debt-financing Gross domestic product (consumption, investment,

exports, imports), jobs, income, and poverty
Monetary sector
Government
Expenditures Money supply and demand,
and interest rates
121
CASES
(% of GDP unless otherwise specified)
Low case Base case High case
Only PIT relief of the Revised package 1 is passed,
Description revised package 1 No policy change 40% of incremental fuel revenues
is passed go to targeted transfers
Additional investment 2.8

target
1.4 1.4 of which 0.3 are transfers
Tax policy financed - 0.8 0 1.0

Tax admin financed 0.2 0.2 0.6
Deficit financed 2.0 1.2 1.2
Public investment
efficiency
60% 60% 80%
122
Deficit % of GDP
2001 -3.8%
2002 -5.0%
Deficit % of GDP 2003 -4.4%
0.0%
2004 -3.7%
-1.0%
2005 -2.6%
2006 -1.0%
-2.0% 2007 -0.2%
2008 -0.9%
-3.0% 2009 -3.7%
2010 -3.5%
-4.0% 2011 -2.0%
2012 -2.3%
-5.0%
2013 -1.4%
2014 -0.6%
-6.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2015 -0.9%
2016 -2.7%E
123 2017 -2.9%E
GDP: The high case shows higher GDP growth as more tax
revenues are invested into the economy.
8
High case: Revised tax reform package 1
Base case: no reform
Percent deviation from steady state
Low case: only lower PIT is passed

6
Low Base High

124
Consumption: The high case initially sees lower consumption due to
higher consumption taxes but later on catches up well as investments
make people more productive.
3
High case: Revised tax reform package 1
Base case: no reform
Low case: only lower PIT is passed

2
-1

Low Base High

125
Consumption Path of Rich and Poor: Transferring back some 40 percent
of incremental revenues to the low income households improves their
welfare today and in the future.
5
4
-1
-2

Non-poor Poor
126
Government Spending: High case represents both an increase in the level
and efficiency of government spending (i.e., spending leads to asset
accumulation).
20
15
10
Low Base High

127
Investment: Over the medium-term, public investment stimulates private
investment in high case. Crowding out effect and higher interest rates
reduce investments in the low case.
5
-1
-3
-5

Low Base High

128
Inflation without Monetary Response for 2 Years: In the high case,
inflation increases by 2.3 ppt due to higher consumption taxes.
2.2
1.8
Difference from steady state
1.4
1.0
0.6
0.2
-0.3
Low Base High

129
Inflation with Monetary Response: But higher inflation can be
moderated by appropriate monetary policy and the BSP has an excellent
track record.
0.4
0.3
0.2
0.1
0.0
-0.1
Low Base High
130
Real Interest Rate: High case shows lower long-term interest
rate as tax financing does not crowd out capital.
1.5
1.2
0.9
0.6
0.3
0.0

Low Base High

131
Real Wages: Tax-financed public investments encourages more job-
generating private investment that raises productivity and wages.
6
Low Base High

132
Government Debt: The high case, which relies on tax financing,
achieves a sustainable debt path.
30
Percent of GDP difference from steady state
25
20
15
10
Low Base High

133
Current Account: The deficit is higher in high case due to capital
importation to support an investment-led growth.
0
Percent of GDP difference from steady state
-0.2
-0.4
-0.6
-0.8
-1

Low Base High

134

Special Focus:
TARA: Tax Administration Reform Act

135
AFC but Tax Efficiency
CTRP RVAT w/ New Taxes
Efficiency
GEC
VAT / TRP
89 Coup
87 Coup
136
Objectives of TARA
This tax reform is about the benefits that Filipinos will reap in the
future, and, the benefits that taxpayers will experience from a more
responsive tax system
TARA is meant to complement TRAIN by:

a. Improving the tax-paying environment
b. improving the efficiency of tax administration
the ease of paying taxes bill
TARA must exist because of TRAIN, to implement a properly progressive

and equitable tax system
137 TARA sa TRAIN

TARA sa TRAIN
The tax gap is large! TARA complements TRAIN by enabling the
tax system to respond to the challenges associated with
confronting this tax gap
Source: Computed using FIES and DoF data
138
A comprehensive tax reform requires both TRAIN and TARA to be passed
TARA sa TRAIN
SECTION 2. Declaration of Policy
1. To provide a healthy environment for the tax paying public that
protects and safeguards taxpayer rights and welfare, that assures the
fair treatment of all taxpayers... uninhibited by laws and rules that
only serve to diminish its ability to detect and prosecute
noncompliance.
2. To modernize tax administration and improve its efficiency and
effectiveness by providing mechanisms that encourage proper
compliance at the least cost and resources possible... the
implementation of technology based filing and payment systems...
3. To enact policies and procedures which are appropriate to different
types of taxpayers... from micro to small, medium to large taxpayers...
139
Taxpayers Bill of Rights
- that satisfy universal taxpayer needs -
1. Right to pay no more than the correct amount of tax
2. Right to a fair and impartial appeal
3. Right to timely information
4. Right to quality tax education and service
5. Right to the consistent and transparent application of
the law
6. Right to have the cost of compliance respected
whenever tax rules are prepared and enforced
7. Right to privacy and confidentiality of information,
unless authorized by the taxpayer or by law
140
Taxpayers Bill of Rights
- that respond to specific domestic needs -
8. Right to speedy disposition of cases, assessments,
audits, investigation and other similar actions
9. Right to finality of tax cases, including, but not limited
to, agreement on the amount of tax due
10. Right to be protected and seek redress against
malicious, excessive and wrongful assessments
141
Tax Appeals Board
What TARA does?
Provides an independent appeals mechanism at the
least cost to taxpayers
Salient features found in TARA
1. Under the Office of the President
2. 18 members: 1 chairperson, 1 co-chairperson and 16
members
3. 6 divisions composed of 3 members each
4. 2 divisions each in Luzon, in Visayas and in Mindanao
5. Proposed budget for initial operations is P15,000,000.00
142
Tax Appeals Board
6. Ex-officio members from the private sector
7. 3 seats per division for the private sector:
1 seat for individual private practitioner
1 seat for law or accounting firm
1 seat for tax advocacy group
8. At least 3 permanent Technical Working Groups per
division
9. TWG composition:
1 from BIR
1 from DOF
2 employees of the Board
143
Tax Appeals Board
10. Ex-officio members are not allowed to vote
11. Ex-officio members may write concurring or dissenting
opinion, and, shall form part of the Decision
12. All decisions are published in the website
Integrity and transparency are key!
144
Tax Appeals Board
- the appeals process -
Instances for Appeal
(1) Adverse decision assessment protest or refund
(2) CIR does not act on the protest or refund
Within 30 days from receipt or inaction

Taxpayer files Notice of Taxpayer files a Petition to
Appeal to Tax Appeals the Court of Tax Appeals
Board (Board) - CTA rules apply -
Within 10 days from receipt of Notice
BIR elevates records to the Board

Within 10 days from receipt of Notice
Board will set case for Preliminary

Conference. Discussions allowed
agreements will be done here
145
Tax Appeals Board
- the appeals process -
15 days from termination of
Preliminary Conference
Under TARA, an appeal will take
If no payment or refund was agreed
upon, the board will order parties to between 245 - 300 days, and
submit Position Paper
with minimal costs to taxpayers
Within 180 days from termination
of Preliminary Conference versus
Board will decide the case
Within 30 days from receipt of decision

An appeal under the CTA, will
Party adversely affected may appeal take a minimum of 2 years to
the Decision of the Board or appeal
the inaction of the Board to the CTA
conclude and is very costly
146
Taxpayer Assistance Program
- at the Department of Justice -
What TARA does?
Provide tax guidance to taxpayers unable or unwilling to
go to the Tax Appeals Board
1. The Public Attorneys Office (PAO) will be mandated to
create a unit that deals in tax inquiries
2. But PAO will not be mandated to handle tax cases
147
Taxpayer Segmentation
What TARA does?
Enacts policy that is appropriate to a taxpayers capacity to
comply
Promotes a tax administration organization that is consistent
with segmentation and responsive to the needs and
practices of various taxpayer segments
1. Taxpayers classified into Micro, Small, Medium and Large
2. PhP 5 million and PhP 10 million: PhP 5 million separates
small from medium; PhP 5-10 million provides a presumptive
VAT
3. Thresholds for Micro and Large are determined by the BIR
148 4. Micro taxpayers will file a simplified form
PhP5.0 M gross sales PhP10.0 M gross sales
Via TARA
Taxpayer Micro Small Medium Large TPs Taxes
Type (based on PIT) (based on PIT) PhP5-PhP10 million above PhP10 million
Quarterly Est Tax Quarterly Est Tax Quarterly Actual NA
Individual
or OSD or OSD
income tax
NA Quarterly Est Tax Quarterly Actual Quarterly Actual
Corporation
or OSD
none none Quarterly Actual Monthly Est Tax NA

Individual
or presumptive Quarterly Actual
VAT
NA none Quarterly Actual Monthly Est Tax Monthly Est Tax
Corporation
or presumptive Quarterly Actual Quarterly Actual
none Quarterly Actual none NA
Individual
percentage
NA Quarterly Actual none none tax
Corporation
Via Regulation
appropriate threshold set appropriate threshold set
Tax policy and filing requirements become increasingly more complex, the larger the taxpayer
The policy of segmentation is further complemented by:

1. Creation of a medium taxpayers office(s) at the BIR
149
2. Development of appropriate performance indicators, consistent with policy
Creation of a medium taxpayers office (MTO) to cater to
the next largest taxpayers
There are 2,300 large taxpayers in BIR
PhP 1.3 trillion

Value from
of taxes 100,000 filers
PhP 0.32 trillion Volume
from of tax filers
about 5 million
150
Recent improvement in e-Filing
More than
90% of
returns are
currently
e-filed
Introduction
of eBIR forms
151
Estimated Income Tax
What TARA does?
Enacts a system that lowers the cost of compliance for micro
and small taxpayers
For micro and small taxpayers, the habit of paying taxes
regularly is more important than the amount it generates
Helps provide a steady flow of taxes to the government, not
and in the future
1. Only individuals and corporations classified as micro and
small can avail of the estimated tax system
2. Assumption of correct payment if income tax paid is
90% of the estimated income tax
152
What to expect in TARA
4. Reduction in the incidence of baseless
assessments
5. 2 options to compute ones taxes:
(i) Last years actual tax
a) Estimated income tax or
(ii) This years estimate
b) Actual income
6. Harmonizes the tax dues between wage earners
and self-employed/professionals by imposing
penalties for non-declaration of quarterly income
by the latter
153
- paying the estimated tax in time t -
1. Using the previous years actual payment (as Declaration)
ITt = [90% x (1/4 x ITt-1)] x 3 quarters, plus
[90% x (1/4 x ITt-1)] +
or
2. Using this years estimated income (as Declaration)
ITt = [90% x (EITt)] x 3 quarters, plus
(q4 ITt) +
154
Presumptive Input VAT
What TARA does?
Provides temporary relief to taxpayers in-transition by
utilizing the VAT system in an advantageous way
For taxpayers that have relatively higher compliance costs
and/or do not have a full complement of VAT registered
suppliers
1. No monthly VAT payments
2. VAT taxpayers with annual sales below PhP10 million may, at
any time, choose to pay the VAT on the basis of actual
declarations, properly receipted
3. VAT refunds paid in cash
155
Presumptive Input VAT
4. Sale and/or lease of goods presumptive input equal to
60% of VAT-able sales, for an effective VAT rate of 4.8%
5. Services presumptive input equal to 30.5% of VAT-
able sales, for an effective VAT rate of 8.3%
6. The assignments of presumptive input VAT rates were
computed using the input/output tables of government
7. However, by using properly receipted actual inputs,
majority of taxpayers will benefit with reduced VAT dues
via higher VAT-able inputs
156
Optional Standard Deduction
- simplifies compliance for micro & small taxpayers -
What TARA does?
Limits the use of the OSD to taxpayers with relatively
higher costs of compliance
1. Maintains the OSD rate at 40%
2. OSD should not be available to taxpayers where the
benefit of its use, in terms of lowering the cost of
compliance, is minimal
3. In these cases, the OSD only makes the mis-declaring of
expenses more difficult for tax administration to detect
157
Related Party Definition
- limiting abuse in related party transactions -
What TARA does?
1. Provides a working definition of related parties for purposes
of implementing the tax law; a first-step in limiting abuse
2. Strengthens Sec. 50 of the NIRC while based on the degree
of control and influence (substantive), RPT is triggered by a
20% ownership of one entity over another, consistent with
SEC rules
3. Furthermore, TARA mandates the issuance of regulations to
control abusive related party transactions (RPT)
(e.g. advanced pricing agreement, transfer pricing documentation, transfer
pricing audit manual, etc.)
158
Related Party Definition
- limiting abuse in related party transactions -
TARA will provide the occasion
for BIR to determine the
substance of transactions
between related parties
Determining, with certainty,

abusive behavior between 2
related entities is the first step
Source: Computed using data from DoF
in recovering and preventing Note the differences in the
lost revenues relative size of expenses
declared by a single entity, on
159
average, across 3 tax regimes
Power to Inquire into Bank Deposits
What TARA does?
Gives access to vital information needed to determine
the true liability of taxpayers that have underdeclared
Amends the Bank Secrecy Law
What to expect from TARA
1. Authority of the Commissioner of Internal Revenue (CIR) to
look into bank deposits in cases of examination of returns
2. Expands current limited applicability of this power of the CIR
(e.g. at present only to determine gross estate and cases of compromise)
160
Performance Indicators
What TARA does?
1. Provides a more balanced and holistic view of tax
administration to key stakeholders in and out of government
2. The use of appropriate KPIs (authorized by the DoF) will lead
to a healthier relationship between taxpayers and the tax
administration
(KPIs must be consistent with the policy of taxpayer
segmentation)
3. Amends the Lateral Attrition Law
161
Performance Indicators
What to expect from TARA
1. The chance to monitor and assess the performance of tax
administration around relevant functions
2. For instance, on top of collection performance:
a) Number of new registrants in RDOs catering to micro and small
taxpayers,
b) Number of small taxpayers graduated to medium taxpayer,
c) Number of productive audits for medium and large taxpayer units,
d) Attainment of 100% electronic filing, or other prevailing priorities,
etc.
162
THANK YOU
TRAIN: OBJECTIVE
Towards a progressive, simple and

efficient tax system
164
Adjusting income brackets and rates
For EQUITY and PROGRESSIVITY
1. Basic subsistence income of 250K, exempt
2. Wider bracket to subject low and middle-
income group at lower tax rates
3. Increased tax rate on high-income individuals
from 32% to 35% (income of 5M and up
Higher consumption tax (excise)
on high-end consumer goods to promote further
PROGRESSIVITY
1. Increased excise tax on fuel oil (90% of which
is consumed by upper 10% of society)
2. Increased excise tax on automobiles, with
higher tax imposed on high-value
cars/automobiles
3. Removed VAT exemptions except on basic
needs health, education and food
Widen tax base
for EQUITY and EQUALITY
1. Removed special concessions granted to
certain individuals like employees of ROHQs
and OBUs
2. Removed/Rationalized VAT exemptions
limiting it to basic needs like food, health
and education
Leveling the playing field
for EQUITY and SIMPLIFICATION
1. Unified exemption base of 250K regardless of civil status and
number of dependents.
2. Unified taxation of all business income regardless of form of
business (whether as self-employed or as corporation)
3. Unified taxation for all transfers of property regardless of the
mode of transfer, whether by sale, donation or by inheritance
4. Unified taxation on all income derived from employment,
whether it be salary or fringe benefit or whatever name
designated
Use of Presumptive Income Tax (PIT)
for SIMPLIFICATION and
REDUCED COMPLIANCE COST
1. Adopts a flat rate tax for small businesses, in
lieu of income tax and VAT
2. Use of simplified bookkeeping for small
businesses
Better Access to information
for STRICTER ENFORCEMENT
1. Access to bank information by mere
initiation of a criminal charge
2. Linking POS/CRM machines direct to BIR
system
3. Use/issuance of electronic invoices real time
THANK YOU

Tax Reform Bill

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Tax Reform Bill

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TRAIN: Tax Reform for

Acceleration and INclusion

DU30 Express - is anchored on a cohesive

Tax Management Association of the Philippines, Inc.

Rep. Joey Sarte Salceda

- President Rodrigo Roa Duterte

3,984,415 4,612,336 7,049,144

8 Source: Philippine Statistics Authority (PSA)

Asia will nearly double its share of global

Asias per capita income will rise six-fold 47,800

7 economies will lead Asias march to

South Japan China Philippines India Indonesia Vietnam Mongolia Cambodia

The Philippines can join Asias march to prosperity!

National Goals: more equal, more prosperous and more competitive

FOUNDATION FOR INCLUSIVE GROWTH, A HIGH-TRUST SOCIETY AND

REDUCING INEQUALITY INCREASING POTENTIAL GROWTH ENHANCING THE SOCIAL FABRIC

Strategic trade and fiscal policy and macroeconomic stability

Maximize demographic Promote and value

Accelerated and strategic development

When TAXEFFORT is included in the fitted model, INFRAPCT becomes

Average growth (%)

28 Source: akamais [state of the internet] Q3 2016 report

If PIT is lowered, but CIT not lowered,

Police Officer II annual basic salary: P203,208

annual gross income: P368,336

personal exemption: P50,000

Tax Due (present): P28,320

Tax Due (proposal): P0

personal exemption and allowance for dependents: P100,000

Tax Due (proposal): P0

Police Officer II annual basic salary: P203,208

personal exemption and allowance for dependents: P150,000

Tax Due (proposal): P0

Impact of year 1 proposal to monthly base pay: P35,312

Captain annual basic salary: P423,744

Tax Due (proposal): P80,695

Impact of year 1 proposal to monthly base pay: P35,312

Captain annual basic salary: P423,744

personal exemption and allowance for dependents: P100,000

Tax Due (proposal): P80,695

Captain annual basic salary: P423,744

personal exemption and allowance for dependents: P150,000

Tax Due (proposal): P80,695

Net retail price + excise

Net retail price

products and commuting cost 35

20 percent of petroleum products and commuting cost. 20

40 Diesel RSP Fuel and lubricant expenditure

Aviation turbo excise (top income decile)

Pump price (USD 53.72 per barrel)

2018 projected Net annual

D1 Subsistence poor 5,233 (160) 0.2

Average rate Proposed VAT

Sources: Cebuana Lhuillier, DOF staff estimates Remittance amount

Sources: Cebuana Lhuillier, DOF staff estimates Remittance amount

Over 600,000 12,000 + 20% 24,000 + 40%

2018 projected Net annual

D1 Subsistence poor 5,233

*Numbers do not add up due to rounding

A highly targeted transfer Conditional cash transfer The unconditional cash

4Ps 5 out of 10 6 out of 10 6 out of 10 6 out of 10

2018 projected Change in

110 *based on FIES 2015 data

Food 36 159 10 1.9 1.2 1.1 1.4 1.6