As we all know, President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) bill into law last December 19. The aim is to generate P130 billion in revenues, which will be used for the Build Build Build Program and other infrasructure projects, salary increase, and investment in health, military, education, among others.
Under this new TRAIN law (Republic Act No. 10963), employees receiving less than P250,000 a year will no longer pay taxes. But in return, taxes for major consumer products such as diesel, gasoline and LPG will increase, as well as taxes for cigarettes and beverages including milk, coffee and softdrinks, cars, cosmetics, real estate, etc.
This is just a summary though. But as expected, there will be chain reaction and most likely, there will be fare hike and therefore, prices of other products will also go up. At the first glance, this tax reform law is a burden to consumers, rich and poor. But if only we will look at the bigger picture, there are some great benefits. Below are five of them.
#1 Millions of Filipinos will have higher take-home pay
There are 6 to 7 million of Filipinos who are receiving P250,000 a year (around P20,833 a month) and below. That is around 83 percent of the total number of taxpayers in the country. They are the factory workers, construction workers, fast food chain workers, mall sales ladies, low-ranking office employees, and even some professionals too.
#2 It can boost the morale of minimum wage earners
The main problem of minimum wage earners is how they can make ends meet, considering that their jobs are the most physical ones. But now that somehow, their burden will be less, it will inspire them to work harder. And most likely, the quality of their work will be higher. Isn’t nice to know that our laborers will be motivated?
#3 Small business owners will benefit too
Obviously, small business owners will somehow be affected because they will need a bigger investment and consumers are likely not to buy as much as before. But then, they will have an optional flat 8 percent tax based on their gross sales or receipts in lieu of business and income taxes, as well as the ease of tax payment processes.
#4 Poor Filipinos will learn to value money
Yes, prices will go up. Therefore, poor people will tend to think twice buying only the things they need, or at least reduce buying things that are not really part of their basic needs such as softdrinks. Employees who will be exempted in paying income tax should be responsible enough to manage their finances, the government will not do it for them.
#5 Health benefits
In case you did not notice, softdrinks and cigarettes are the two major products that are affected by the Train law. Unlike before, softdrinks will now be taxed. At the same time, each pack of cigarette will now have at least P32.50 excise tax. Therefore, it’s like telling people to consume less softdrinks, and to stop smoking. That’s the health benefits.
Nevertheless, those who are not paying taxes such as jeepney drivers will be greatly affected. It will be also an additional burden for the unemployed. But come to think of it, they will also benefit from the taxes that will be collected because of the jobs that will be created. So as a whole, I think this Train law is both a short-term and a long-term solution.