Train Law

Cabeliza | Cam | Co | Dimabuyu | Elloso | Rodil | Tan

POS100 F
GAME TIME!
 Train Law
Cabeliza | Cam | Co | Dimabuyu | Elloso | Rodil | Tan
Fundamental ● Police Power
Powers of Power of Eminent
State Domain
Power of Taxation
Fundamental ● Police Power
Powers of Power of Eminent
State Domain
Power of Taxation
What is TAX?
● Rate or amount to be collected
provided it is not confiscatory
Imposed on persons or property
Form of revenue measure
 Why TRAIN LAW?

● Where our money goes

 TRAIN Law
Tax Reform for Acceleration and Inclusion Act
Republic Act No. 10963
 TRAIN Law
Dec 19, 2017 Jan 1, 2018

Tax provisions Implementation

signed by Duterte
 Changes to Certain Economic Aspects
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◈ Personal Income Tax
◈ Sugar-sweetened Beverages Tax
◈ Tax Rates for Fuels
◈ Tax on Coal and Other Minerals
◈ Value-Added Tax (VAT)
Income Tax Previous
Annual Salary Rates
Not over 10K 5%
10K-30K 500 + 10% of excess over 10K
30K-70K 2,500 + 15% of excess over 30K
70K-140K 8,500 + 20% of excess over 70K
140K-250K 22,500+ 25% of excess
250K-500K 50,000+30% of excess
500K+ 125,000+32% of excess
Exemptions Allowed additional exemption of 25K for each dependent (not exceeding 4), permium
for health and hospitalization insurance (2.4K per yr), and personal exemption (50K)
Income Tax TRAIN Law

Annual Salary Rates

Not over 250K 0%
250K-400K 20% of excess over 250K
400K-800K 30K + 25% of excess over 400K
800K-2M 130K + 30% of excess over 800K
2M-8M 490K + 32% of excess over 2M
8M+ 2.4M + 35% of excess over 8M
◈ Rates will change in 2023
onwards
◈ No more exemptions
Sugar-sweetened Beverages Tax

Php 6/liter Php 12/liter

Drinks using artificial sweeteners Drinks using high fructose corn syrup

Exempted Products:

Instant coffee Pre-packaged

powdered
100% natural fruit
coffee
& veggie juices Ground coffee
milk
Tax Rates for Petroleum Products

Fuel Products Previous TRAIN Law Tax Rates

Naphtha and regular Php 4.35 Php 7, 9, 10
gasoline
Unleaded gasoline Php 4.35 Php 7, 9, 10
Diesel fuel oil Php 0 Php 2.5, 4.5, 6
Tax on Coals and Other Minerals

Minerals Previous TRAIN Law

(per metric ton)
2018 2019 2020

Coal Php 10 P50 P100 P150

Non-metallic minerals 2% 4%
Metallic minerals 2% 4%
Gold and chromite 2% 4%
Indigenous petroleum 3% 6%
Value-Added Tax

Increase of VAT threshold from Php 1,919,500 to Php 3M (to be adjusted to

inflation not later than 2021 and every 3 yrs thereafter)

Exempted: sale of drugs and medicines for diabetes, cholesterol, and hypertension
beginning 2019

Exempted: association dues, membership fees, and other assessments and charges
collected by homeowners’ and condominiums’ associations

Reduces VAT-exempt threshold from Php 3,199,200 to Php 2M on sale of house and
lot (and other residences) beginning 2021
Advantages
Advantages of TRAIN

● Raises revenues
○ In 5 years’ time, Php 786B in revenues
○ Raises gov’t revenue by 16.4% in Q1
● More funds for government projects
○ Build, Build, Build program
Advantages of TRAIN

● Increases “Take Home Pay” for Taxpayers

○ Three-year unconditional Cash Transfer (UCT)
scheme for 10M poor households (4Ps members,
senior citizens, DSWD’s Listahan
○ Monthly cash subsidies of Php 200 in 2018, and
Php 300 in 2019 and 2020
● More job employment in construction sectors:
93,000 jobs
Disadvantages
Disadvantages of TRAIN

1. Train law to result in higher rates of inflation

a. Additional taxes on fuel products increase selling price of
consumer products
b. 12% VAT imposed on consumer products will be
computed against a higher selling price = larger VAT on
the sale of an already expensive prime commodity
c. Inflation rates increased from 2.9% (Dec. 2017) to 6.7%
(Oct. 2018)

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Disadvantages of TRAIN

2. Unemployment rates to increase in the long run

a. Increase in fuel price results in increase costs of production
b. Increased costs of production reduces sales and profits due to
reduction in purchasing power
c. Companies experience losses and may result in layoffs,
increasing unemployment rates

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Disadvantages of TRAIN

3. Higher costs of living = heavier burden on the poor

a. The unemployed suffer more due to reduction in purchasing
power (ex. Single breadwinner in the family, Senior citizens,
Orphaned children, marginalized PWDs)
b. Additional expenses per family = P3,640/ month
c. Jeepney driver extend to 16 hours instead of 12 hours
d. 21.6% Filipinos live under the poverty line = 22 millions
Filipinos
e. Jobless Filipinos increased from 15.7% (Dec. 2017) to 23.9%
(Mar. 2018) = 10.9 Million Filipinos
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Regular Cars vs. some Luxury Cars
Brand and Model Current SRP Estimated new SRP Change in SRP

Toyota Vios 1.3 599,000 (2%) 607,000 (4%) +10,734

Mitsubishi Mirage G4 700,000 (2%) 712,544 (4%) +12,544

GLX

Toyota Innova 2.0 J 919,000 (12,000+20% in 957,618 (10%) +38,618

excess of 600,000)

Ford Everest Titanium 2.2 1,739,000 (112,000 + 1,794,731 (20%) +55,731

4X12 40% in excess of 1.1
million)

Toyota Land Cruiser 4.5 4,455,000 (512,000 + 4,095,256 (50%) - 359,744

V8 60% excess of 2.1
million)

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Documentary Stamp Tax
Double Rates for:
Issuance of Transfer of
Shares
Certificates of Profits, etc.
Bank Checks
All Bills of Exchange
Life Insurance Policies
Policies of Annuities and
Pre-Need Plans
Certificates and
Warehouse Receipts
Increased Rates for: Imposed Tax on:
Jai-Alai, Horse Race
Tickets
Bills of Lading
Proxies
Power of Attorney Deeds Donation of Real
All Debt Instruments
Property ( Php 15 per Php
Leases and Hiring (from Php 1 to Php 1.50)
1,000)
Agreements
Mortgages, Pledges, and
Deeds of Trust
Charter Parties
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Disadvantages of TRAIN

Efforts to cushion Train Law is not enough:

a. Train Law was imposed on December 2017 yet Cash
Transfers were only distributed on July 2018
i. Cash grants are too low (Php 200 per month)
b. Cash Transfers and exemption of income tax for some
Filipinos were not enough to offset higher spending
due to increase in prices of goods and services

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Our Stance: Against
NO to TRAIN LAW

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Economic Implications
Economic Implications of TRAIN

GOOD VISION?

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Economic Implications of TRAIN

GOOD VISION?
● TRAIN vision heavily dependent on assumptions
○ 7% economic growth
○ Infrastructure = productivity
○ Resources are present

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Economic Implications of TRAIN

REAL EFFECTS

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Economic Implications of TRAIN

REAL EFFECTS
● TRAIN affects the poor more
○ Forecast was seen to affect poor = cash transfer
○ Insufficient funds
○ Wrong timing

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Economic Implications of TRAIN

REAL EFFECTS
● TRAIN affects the PH macroeconomic activity
○ Higher inflation rate
■ 8% in 1995 to 9.1% in 1996
■ greatly affects the poor

○ Slow GDP growth rate

■ 5.8% in 1996 to 5.2% in 1997
■ 6% in 2004 to 5.1% in 1997

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Connection to
Constitution
 R.A. 10963 was approved by the
House of Representatives without a
quorum when it was ratified in the
joint bicameral conference report

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R.A. 10963 was not able to reach a
majority vote as required by the
Constitution

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 Violation of Article VI,
Section 16 (2) and 27 (1) of
the 1987 Constitution
 Article VI, Section 16 (2) and 27 (1)
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Section 16.2 A majority of each House shall constitute a quorum to do business, but a smaller
number may adjourn from day to day and may compel the attendance of absent Members in
such manner, and under such penalties, as such House may provide.

Section 27.1 Every bill passed by the Congress shall, before it becomes a law, be presented to
the President. If he approves the same he shall sign it; otherwise, he shall veto it and return the
same with his objections to the House where it originated, which shall enter the objections at
large in its Journal and proceed to reconsider it. If, after such reconsideration, two-thirds of all
the Members of such House shall agree to pass the bill, it shall be sent, together with the
objections, to the other House by which it shall likewise be reconsidered, and if approved by
two-thirds of all the Members of that House, it shall become a law. In all such cases, the
votes of each House shall be determined by yeas or nays, and the names of the Members voting
for or against shall be entered in its Journal. The President shall communicate his veto of any
bill to the House where it originated within thirty days after the date of receipt thereof,
otherwise, it shall become a law as if he had signed it.
Violation of Rule X, Section 63 of the Rules
of the House of Representatives:

“A conference committee report shall be

ratified by a majority vote of the Members of
the House present, there being a quorum.”

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Thanks!

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 Sources

● http://www.ntrc.gov.ph/images/Publications/train/tax-changes-you-need-to-know.pdf
● http://hrlibrary.umn.edu/research/Philippines/PHILIPPINE%20CONSTITUTION.pdf
● http://www.congress.gov.ph/download/docs/hrep.house.rules.pdf
● https://www.worldbank.org/en/news/press-release/2018/05/30/philippines-poverty-rate-declines-more-well-paying-jobs-and-op
portunities-needed
● https://tradingeconomics.com/philippines/unemployment-rate
● https://pia.gov.ph/news/articles/1010870
● https://www.philstar.com/headlines/2018/07/25/1836589/lawmakers-press-supreme-court-stop-train-law
● https://www.rappler.com/business/216008-inflation-rate-philippines-october-2018
● https://www.philstar.com/business/motoring/2018/03/07/1794151/tracking-car-prices-under-train-law
● https://www.rappler.com/business/216818-ask-the-tax-whiz-train-law-documentary-stamp
● http://manilastandard.net/opinion/columns/hail-to-the-chair-by-victor-avecilla/256378/pros-and-cons-of-train.html
● https://newsinfo.inquirer.net/994311/3-senators-call-for-suspension-of-train-law
● http://conceptnewscentral.com/index.php/2018/01/03/train-law-benefits-everyone-including-poor-roque/
● https://www.rappler.com/newsbreak/iq/193170-train-tax-reform-law-effects-filipino-consumers-workers
● https://www.rappler.com/nation/193371-makabayan-bloc-supreme-court-petition-train-law-philippines
● https://www.gmanetwork.com/news/money/economy/640695/duterte-s-ambitious-infra-plan-made-feasible-by-train-law/story/
● https://www.philstar.com/headlines/2018/06/16/1825093/p20-billion-train-subsidies-distributed-july
● https://www.rappler.com/thought-leaders/199688-tax-reform-law-impact-income-filipinos
● https://manila2018.dof.gov.ph/wp-content/uploads/2018/02/TRAIN-Package-1-Grand-Presentation.pdf

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