“HOW will the tax reform affect Filipinos?”
This could be the question running into our minds after President Rodrigo Duterte on December 19, signed into law the tax reform package along with the P3.767-trillion 2018 annual budget.
Just these past few days, we saw on our social media feed that S&R, a membership shopping chain, announced the ceasing of its “unlimited soda” offering effective January 1 as the government implemented higher excise taxes on sugar-sweetened drinks.
To clearly define, the reform or Tax Reform for Acceleration and Inclusion (Train/ Republic Act 10963) law exempts from paying taxes the first P250,000 annual taxable income, meaning those earning P21,000 a month would no longer need to pay income taxes. It also raises the tax exemption for 13th month pay and other bonuses to P90,000.
However, to compensate for loss of revenue from income taxes, Filipinos will need to pay excise tax on sweetened beverages, and higher excise taxes on petroleum, automobile, tobacco, mining and coal.
Train is the first package of the Duterte administration’s Comprehensive Tax Reform Program (CTRP).
Just recently, Associated Labor Unions-Trade Union Congress of the Philippines (ALU-TUCP) spokesperson Alan Tanjusay said Train will have an adverse effect to members of the informal economy and will push for wider and deeper poverty-related problems if not addressed.
Informal economy is the part of an economy that is neither taxed, nor monitored by the government. The group is referring to vendors, fisherfolks, farmers, public utility vehicles and pedicab (cycle rickshaw) drivers, among others.
“If not addressed, the brewing social storm would create bigger and wider poverty among our people. Workers are already burdened with pre-existing bad conditions and encumbered with traffic congestion and high cost of living. The unclear, if not inadequate social safety net, will offer no hope for workers in coping with rising inflation,” Tanjusay said in a statement.
But, Finance Secretary Carlos Dominguez III has made it clear that even non-taxpayers will benefit from the reform by way of more job opportunities, better infrastructure that will lower the transport and distribution costs of goods, and improved services.
Dominguez said even those not paying taxes will benefit because of higher spending for education, health care, and other forms of human capital development that would help set the foundation to lift themselves out of the poverty trap.
“How can I benefit you if you’re not paying tax? I can benefit you by giving you a job, right? So how am I going to do that? Invest money and then create infrastructure,” Dominguez said.
Dominguez also said that up to 30 percent of the incremental revenues from the Train will help fund a targeted cash transfer program for the country’s poorest 10 million households to aid the bottom 50 percent of the population in coping with the initial effects of the tax reform law on the prices of basic necessities.
As we enter the New Year and dance our way to 2018, we will observe how this reform will cascade the “promised benefits’ to the public, especially, the poorest of the poor. We will keep an eye on whether it will give more benefits to the tax payers or the other way around.