Highlights of the reform

1. Exempt the first PHP 250,000 annual taxable income, folding in the personal and
additional exemptions.

2. Provide additional exemption of up to PHP 82,000 for bonuses.

3. Allow minimum wage earners to graduate by increasing exemption threshold and

moving towards incremental taxation.

4. Reduce effective tax rates for those with annual taxable income between PHP
250,000 and PHP 5 million.

5. Higher tax rate of 35% for those above PHP 5 million annual taxable income.

*To reduce compliance cost for self-employed and professionals (SEP’s), especially
small taxpayers with gross sales/gross revenues below 3M by giving them the option
to avail of the 8% flat tax on gross revenues in lieu of income and percentage tax for
business.

- To improve tax compliance, we are proposing an optional 8% flat tax on gross

revenues in lieu of the income tax and percentage tax/VAT.

- The 8% rate combines the 3% percentage tax and the 5% effective income tax.

*Reduce and restructure the donor’s tax to a single tax rate of 6% on net donations for
gifts exceeding P100, 000 annually, regardless of relationship between donor and
donee.

*Reduce and restructure the estate tax to a single tax rate of 6% based on the net
value of the estate. Standard deduction of 1M and up to 3M for family home is
exempted.

*To enhance the equity of the tax system by removing the preferential income tax rates
for ROHQ employees, and rationalizing the tax treatment of fringe benefits. 


*Broaden the VAT system by limiting exemptions to raw food and other necessities
(education and health).

*Staggered increase of excise tax on all petroleum products and index to inflation.

*Update excise tax on automobiles.

*Introduce a tax on sugar-sweetened beverages (SS) with adjustment every three years
based on cumulative inflation.

*Minimum wage earners will also benefit from the income tax proposal. i

- If their income exceeds the minimum wage even by just 1 peso, their entire income
is taxable already under the current system. This also means that many minimum
wage earners and their employers agree to keep the workers at minimum wage to
avoid the tax.

- The tax reform aims to correct this by making the first PHP 250,000 of annual
taxable income exempt. This means that minimum wage earners can now ‘graduate’
and not be taxed on their whole income. Only the amount above the PHP 250,000
threshold will be taxed. 




PACKAGE 1: PERSONAL INCOME TAX AND CONSUMPTION
TAX
“Our goal is to correct our tax system’s problems to become SIMPLER, FAIRER, and
MORE EFFICIENT. We will lessen the overall tax burden of the poor and the middle
class.”

3 MAIN CHANGES
1. PERSONAL INCOME TAX

- 250,000 exempt

2. VAT EXEMPTIONS

- Reduced

3. PETROLEUM/ OIL EXCISE

- Oil excise is a highly progressive tax since those who consume more will pay more
tax compared to those who consume less.

SOCIAL PROTECTION
PROGRAMS
1. Unconditional cash transfer

2. Pantawid Pasada Program/Transport subsidies

3. Social Welfare programs thru the National ID

PACKAGE 2: CORPORATE INCOME TAX AND INCENTIVES

REFORM
We have a complex tax incentives system.”
- Firms with no incentives pay the regular rate of 30% of net taxable income
- Firms with incentives pay between 6% to 13%

ex: Almost all of the 90, 000 SMEs pay the regular 30% rate

TAX INCENTIVES USUALLY

VIOLATE THE PRINCIPLES OF
1. Efficiency

2. Equity

3. Simplicity

- incentives may be justified if they provide net benefit to society as a whole.

TRAIN LAW MYTHS

1. Tax increase in automobile excise tax will weaken the automobile industry at
the cost of jobs.
- several factors affect the automotive industry other than excise taxes

- personal income tax reduction will offset the additional expenses from the
increase in automobile excise

2. The burden of the tax will be on the poor instead of the rich.
- higher income, higher burden

- based on capacity to pay

3. Imposing tax on diesel is anti-poor.

- rich consumes more petroleum products that the poor

- for commuters; increase in fare price is addressed through mitigating

measures; jeepney modernization and cash assistance for the poor

4. There is no need to update excise taxes on petroleum products.

- There is a need; long overdue already

- still same 2 decades ago while average income has doubled

- reduce consumption of petroleum products; to prevent harm caused by air

pollution and traffic congestion

5. Lowering personal income taxes means more money in people’s pockets that
boost consumption and consequently stimulate the economy. No need to
increase taxes.
- TRAIN seeks to correct and simplify the tax system and make it fairer by
lowering 1) PIT, reducing 2) VAT exemptions, and adjusting 3) excise taxes on
petroleum products and automobiles

- reform = increase spending in public investment

- stimulate economy more

- more inclusive way of spending our shared resources, rather than merely
boosting individual consumption spending by lowering all taxes

- balance investment spending and consumption spending

6. Now is not the good time to increase the excise on petroleum products.
- economy is very strong

- inflation is very low and manageable

- global crude oil price is still low relative to years back and i projected to remain
very low

7. Only the personal income tax needs to be fixed. All the other proposed ax
changes should not be pushed.
- PIT alone will not correct the inequity

- several taxes have not been adjusted in 20 years

- excessive tax exemptions and special treatments without good basis

- correct inequity and make tax more progressive

8. Fares and commodity prices will skyrocket because of the proposed increase
in oil excise.
 - No, inflation rare will be additional at 1.5% the most

- food prices may increase by 1% while transport price at 2%

9. The tax reform proposal does not resolve tax evasion of self-employed and
professionals. This should be fixed instead of making additional taxes.
- reform will simplify compliance through a single rate of 8% (in lieu of income
tax and percentage tax) for small business/self-employed/professionals

- relax bank secrecy laws for fraud cases

- electronic receipts

- cash registers and purchase data

10. The tax reform bill is regressive and anti-poor.

- Pro-poor and progressive

- restructured PIT

- unnecessary VAT exemptions removed

- excise tax adjusted (petrol/auto)

- 83% of individual taxpayers including MWE’s will be exempted from paying

income tax