(Eagle News) – The Department of Finance (DOF) said Filipino consumers now have a combined “P10 billion monthly cash bonanza” following the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Act.
According to Finance Secretary Carlos Dominguez III, the amount represents additional purchasing power that will further stimulate the country’s economy, which is now among the fastest-growing in Southeast Asia.
“Our estimate is P10 billion a month in the reduction in collections from the withholding tax,” Dominguez said.
TRAIN, which was signed into law by President Rodrigo Duterte on December 19, 2017, took effect starting January this year.
The DOF said the law has benefited over six million compensation earners as it significantly slashed personal income tax (PIT) rates for 99 percent of taxpayers.
The first of five tax reform packages under the government’s Comprehensive Tax Reform Program (CTRP), TRAIN exempts those earning an annual taxable income of P250,000 and below from paying the PIT.
It also exempts the 13th month pay and other bonuses not exceeding a total of P90,000.
“In effect, those with a taxable annual income of P250,000, on average, would be able to take home a cash bonanza equivalent to a substantial one-month’s pay per year,” Dominguez said.
Under TRAIN, the tax brackets have also been adjusted so that those with taxable income of more than P250,00 but not above P2 million pay only between 20 and 30 percent PIT.
Only those earning P8 million and above, which comprise less than one percent of the individual taxpayer base, are taxed 35 percent.
According to DOF, the PIT rates of individuals from 2023 onwards will further be adjusted downwards so that those earning above P250,000 but not more than P2 million would pay only between 15 percent and 25 percent in income tax.
Revenue-enhancing measures
According to DOF, the TRAIN also contained revenue-enhancing measures to offset the loss from PIT collections.
These measures aim to support the government’s unprecedented spending on infrastructure and human capital development.
These include the removal of certain exemptions to the value-added tax (VAT); adjusted tax rates for fuel, automobiles, tobacco, coal, minerals, documentary stamps, foreign currency deposit units, capital gains for stocks not in the stock exchange, and stock transactions; and new taxes for sugar-sweetened beverages (SSBs) and non-essential cosmetic procedures.
The TRAIN also introduced cuts in the estate and donor’s taxes.
DOF-Revenue Operations Group (ROG) Undersecretary Antonette Tionko said the Bureau of Internal Revenue (BIR) has yet to collate the data on the net amount of tax collections raised from these revenue-enhancing measures.
“Maybe after the first quarter,” Tionko said in response to queries on when the government can compute the net revenues from the TRAIN.
Non-taxpayers also benefit from the TRAIN by way of (UCTs) and other social mitigation programs as provided under this law.
Meanwhile, Finance Undersecretary Karl Kendrick Chua said unconditional cash transfers (UCTs) amounting to P2,400 for 2018 are being distributed within the first quarter to some 7 million households, comprising the 4.4 million existing beneficiaries under the Pantawid Pamilyang Pilipino Program (4Ps) and 3 million indigent senior citizens already receiving social pensions,
He said these UCTs of P200 a month or a total of P2,400 this year will be increased to P300 a month or a total of P3600 a year in 2019 and 2020.
The DOF said up to 30 percent of the incremental revenues from the TRAIN law was earmarked for social mitigation measures, while 70 percent would help support the government’s “Build, Build, Build” infrastructure program.
