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CSPPS holds seminar on Tax Reform

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Article by Dhanicca Amor M. Domingo

January 2018 marked the start of a new tax implementation scheme in the Philippines. In line with this, the Center for Strategic Planning and Policy Studies (CSPPS) of CPAf organized a policy seminar focusing on the features and impacts of the newly implemented Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law. Attorney Rodelio T. Dascil, Director General of the Senate Tax Study and Research Office served as the resource person.

The country’s tax reform before the implementation of the TRAIN Law happened way back in 1997 and was based on the 1994 Consumer Price Index. According to Atty. Dascil, it is now high time to update it. A comprehensive tax reform, he discussed that it aims to address the bracket creep on income taxes and the issue regarding the right amount of tax payments made by the self employed and professionals. Furthermore, it also aims to provide tax relief for public and private sector employees by raising the annual income tax exemption and the ceiling for monetary benefits. Most importantly, the tax reform aims to help build the country’s physical and human infrastructures.

Features of the TRAIN Law

Atty. Dascil first discussed the main feature of the TRAIN Law, and that is, the reduction of income taxes of Filipino taxpayers. Compensation earners, self employed, and professional taxpayers with an annual gross income of Php 250,000 and below are now tax exempt. Under the new law, Atty. Dascil emphasized that taxpayers; however, can no longer claim for personal and additional exemptions.

Tax rates of mix income earners were also subjected to changes under the TRAIN law. Other features of the law involve administrative reforms and changes with regards to donor’s taxes and estate taxes.

Atty. Dascil also emphasized the transactions which are exempted from taxes. Some of them, just to name a few, involve those under the health and education sector, renewable energy and tourism, and agriculture sector.

Excise Taxes

The now know TRAIN law is actually based on a number of consolidated senate bills, house bills, and senate resolutions. Earlier versions of it originally covers changes in personal income taxes only. Atty. Dascil said that while President Rodrigo Duterte agreed on lowering income taxes, the President made sure that there would be certain tradeoffs – tradeoffs in the form of excise taxes.

Excise taxes are imposed on petroleum, coal, and cigarettes. Starting January 31, 2018, excise taxes on cigarettes will increase by Php 2.50 every six months until December 31, 2023. By 2024, it will be increased by 4% every year through Revenue Regulations.

Excise taxes are also added on automobiles. Hybrid cars, however, will be taxes at 50% of the applicable excise tax rates on automobiles.

For cosmetic procedures, 5% is imposed on invasive cosmetic surgeries and body enhancements which are directed solely towards improving or altering one’s appearance.

Sweetened beverages are also subject to increased excise taxes. Atty. Dascil further added that annual taxable income for mineral products also increased as well as tax rates for documentary stamps.

Impacts of the TRAIN Law

Atty. Dascil shared that with the TRAIN Law, the Philippine government is expected to gain revenue estimated at almost Php 90 Billion during its first year of implementation (2018). This will further grow through the years to come.

Before ending his talk, he clarified that the issue regarding the law affecting food prices is not supported. He discussed that the law can potentially increase inflation by up to 0.7% in 2018 but this, he reiterated, is due to increasing oil prices and will be manageable especially with the savings Filipino taxpayers will incur from lower income taxes.

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