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Tax Reform for Acceleration and Inclusion Act

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The Tax Reform for Acceleration and Inclusion (TRAIN) Act, officially cited as Republic Act No. 10963, is
the initial package of the Comprehensive Tax Reform Program (CTRP) signed into law by President
Rodrigo Duterte on December 19, 2017.[1] The TRAIN Act is the first of four packages of tax reforms to
the National Internal Revenue Code of 1997, or the Tax Code, as amended.[2] This package introduced
changes in personal income tax (PIT),[3] estate tax, donor's tax, value added tax (VAT), documentary
stamp tax (DST) and the excise tax of tobacco products, petroleum products, mineral products,
automobiles, sweetened beverages, and cosmetic procedures.[4]

Tax Reform for Acceleration and Inclusion Law

Coat of arms of the Philippines.svg

Congress of the Philippines

Long title

An Act amending Sections 4, 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97,
99, 100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174,
175, 177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236,
237, 249, 254, 264, 269, and 288; creating new Sections 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B,
and 265-A; and repealing Sections 35, 62, and 89; all under Republic Act No. 8424, otherwise known as
the National Internal Revenue Code of 1997, as amended, and for other purposes

Citation
Republic Act No. 10963

Territorial extent

Philippines

Enacted by

House of Representatives

Enacted

December 14, 2017

Enacted by

Senate

Enacted

December 13, 2017

Commenced

January 1, 2018

Legislative history

Bill introduced in the House of Representatives

House Bill No. 5636

Bill published on

May 15, 2017

Introduced by

Dakila Cua

First reading

May 15, 2017

Second reading

May 31, 2017

Third reading
May 31, 2017

Committee report

Committee Report No. 229

Bill introduced in the Senate

Senate Bill No. 1592

Bill published on

September 20, 2017

Introduced by

Aquilino Pimentel III

First reading

September 20, 2017

Second reading

November 28, 2017

Third reading

November 28, 2017

Committee report

Committee Report No. 164

Status: In force

The prominent features of the tax reform are lower personal income tax and higher consumption tax.
Individual taxpayers with taxable income not exceeding ₱250,000 annually are exempted from income
tax. The exemption for minimum wage earners is retained in the revised tax system. Tax rates for
individual taxpayers still follow the progressive tax system[5] with the maximum rate of 35%, and
minimum rates of 20% (taxable years 2018 to 2022) and 15% (2023 onwards). On the other hand,
consumption taxes, in the form of higher excise tax on tobacco products, petroleum products,
automobiles, tobacco, and additional excise tax on sweetened beverages and non-essential, invasive
cosmetic procedures were introduced. It also expanded the VAT base by repealing exemption provisions
in numerous special laws.
The TRAIN Act is aimed to generate revenue to achieve the 2022 and 2040 vision of the Duterte
administration,[3] namely, to eradicate extreme poverty, to create inclusive institutions that will offer
equal opportunities to all, and to achieve higher income country status. It is also aimed at making the tax
system simpler, fairer and more efficient[6]. Regardless, contentions about the passing of this law has
been present since the beginning and the subsequent reception by the people since its ratification has
been controversial. In the first quarter of 2018, both positive and negative outcomes have been
observed. The economy saw an increase in tax revenues, government expenditure and an incremental
growth in GDP.[7] On the other hand, unprecedented inflation rates that exceeded projected
calculations,[8] has been the cause for much uproar and objections. There have been petitions to
suspend and amend the law, so as to safeguard particular sectors from soaring prices.[9][10][11]

Vision and goals of TRAIN Edit

The TRAIN Act aims to address the reputed weaknesses of the Tax Code, specifically through the
following objectives:[3]

First, it intends to simplify the previous system to make it more straightforward and intuitive.

Second, it intends to create a more "just" taxation scheme, wherein taxation is staggered and distributed
on the basis of financial capability and the underprivileged are able to reap more advantages.

Third, it intends to improve the efficiency by which tax is collected, particularly tackling issues of
compliance.

Fourth, it increases the tax burden felt by the general population thus increasing the overall inflation
rate.

The changes instituted by the tax reform is expected to be able to increase revenue to finance the
infrastructure, healthcare and education programs of the Duterte administration.[12][1] The notion that
the poor will be taxed less than the wealthy population is actually a propaganda widely spread by the
government, the additional taxes imposed by the government will just be passed down through the
lower and middle income class thus increasing the inflation.

In the long term, TRAIN Act is just the first from a series of tax reforms, as part of the CTSP, which will be
one of the principal means by which the 2020 and 2040 vision of the incumbent administration is to be
achieved. The vision in 2020 is that poverty will be reduced from 21.6% to 14%, while 2040 sees the
Philippines as having “eradicated extreme poverty”, established “inclusive economic and political
institutions where everyone has equal opportunities” and achieved “high-income country status”.[3] This
can be achieved if economic growth can be sustained by at least 7% each year and if the source of
growth can be shifted to investment from consumption. This means prioritizing investments on people
through "health, education, life-long training, social protection, infrastructure, and research and
development" and investments on infrastructure to boost productivity [13]

Legislative history Edit

House of Representatives Edit

House Bill No. 4774 is credited as the original measure that led to the TRAIN Act. It was endorsed by the
Department of Finance (DOF) to the Philippine House of Representatives on September 26, 2016 as the
first package of a wider CTRP.[14] It was filed before the legislature on January 17, 2017 by Congressman
Dakila Cua[15] of Quirino. Cua is also the chairperson of the Ways and Means Committee of the
Congress which deals on taxation.[14]

After thirteen hearings which was done within the span of four months, the House Bill No. 7890 was
consolidated with 54 other tax-related bills to come up with a House Bill 5636, a substitute bill which had
"moderate" changes from House Bill 4774. The substitute measure was approved on May 8.[14]

The DOF requested President Rodrigo Duterte to declare the bill as "urgent" on May 29, 2017. Bills
passed on the second reading by the Congress but are not certified "urgent" by the president could only
be voted upon after copies of the given measure is provided to House of Representatives members three
days before the day of the third and final reading.[14] On May 31, 2017 just before the 17th Congress
adjourn its first regular session, the bill passed the final reading with 246 voting for and 9 against the bill.
Only one made an abstention. Most of those who opposed were from the Makabayan bloc.[16]

Senate Edit

A version of the bill was filed in the Senate in March 2017 by Senate President Aquilino Pimentel III. By
May 2017 six public hearings were conducted by the senate. The Senate had to wait for the House of
Representatives version to get pass before it could start plenary discussions like other bills on budget or
tax and appropriations. The Senate voted 17-1 to approve the Tax Reform Acceleration and Inclusion
(TRAIN) bill, with Sen. Risa Hontiveros being the lone dissenter on Nov 28, 2017. On the succeeding
voting for the TRAIN, the positive votes were cast by Senators Sonny Angara, Nancy Binay, Frank Drilon,
JV Ejercito, Chiz Escudero, Win Gatchalian, Dick Gordon, Gringo Honasan, Loren Legarda, Joel Villanueva,
Koko Pimentel, Grace Poe, Ralph Recto, Tito Sotto, Cynthia Villar and Migs Zubiri. The negative votes
were cast by Senators Ping Lacson, Risa Hontiveros, Bam Aquino and Antonio Trillanes IV[14]
Duterte's certification of the TRAIN as "urgent" allowed the bill to get passed the second reading[17] on
November 28, 2017.[18] Within the same day, the Senate bill passed the third and final reading with 17
senators voting for the bill.[19] Only Risa Hontiveros voted against the bill.[17]

Bicameral Conference Committee Edit

The Bicameral Conference Committee consolidated the bills passed by the House of Representatives and
the Senate. The committee then approved a bill which favored the Senate version on December 11, 2017
and prepared a report after for ratification of both chambers of the Congress and signing of the
President.[20]

the House of Representatives and the Senate ratified the version of the bill prepared by the Bicameral
Conference Committee on December 13, 2017.[21]

Signing into law and partial veto Edit

President Duterte exercised his veto power to void 5 provisions of the law. The provisions vetoed were
the following:

Reduced income tax rate of employees of Regional Headquarters (RHQs), Regional Operating
Headquarters (ROHQs), Offshore Banking Units (OBUs), and Petroleum Service Contractors and
Subcontractors;

Zero-rating of sales of goods and services to separate customs territory and tourism enterprise zones;

Exemption from percentage tax of gross sales/receipts not exceeding five hundred thousand pesos
(P500,000.00);

Exemption of various petroleum products from excise tax when used as input, feedstock, or as raw
material in the manufacturing of petrochemical products, or in the refining of petroleum products, or as
replacement fuel for natural gas fired combined cycle power plants; and

Earmarking of incremental tobacco taxes.[1]

Summary of amendments Edit

These were the revisions made to the Tax Code:[22]

Amended Sections 5, 6, 24, 25, 27, 31, 32, 33, 34, 51, 52, 56, 57, 58, 74, 79, 84, 86, 90, 91, 97, 99,
100, 101, 106, 107, 108, 109, 110, 112, 114, 116, 127, 128, 129, 145, 148, 149, 151, 155, 171, 174, 175,
177, 178, 179, 180, 181, 182, 183, 186, 188, 189, 190, 191, 192, 193, 194, 195, 196, 197, 232, 236, 237,
249, 254, 264, 269, and 288

Created Sections 51-A, 148-A, 150-A, 150-B, 237-A, 264-A, 264-B, and 265-A

Repealed Sections 35, 62, and 89

Complementary measures Edit

There are four (4) complementary measures undertaken to ensure the income from the TRAIN Law will
be properly allocated for the development of the Philippines as a nation. These are the Tax
Administration, Ear Making, Infrastructure Projects, and Social Programs.[23]

Tax Administration Edit

Steps to modernize and refine the tax administration processes are undertaken to support the changes
in tax policy so as to improve security against tax crimes and to ensure taxpayer compliance. On top of
improving electronic systems (e.g. eBIR forms, Electronic Filing and Payment System, mobile payments)
the following reforms are implemented:[23]

Mandatory fuel marking

Provision for use of electronic receipts

Connection of cash registers and point of sale machines to BIR servers for real time reporting of sales
and purchase data

Relaxation of bank secrecy laws and automatic exchange of information to allow for more effective
prosecution of criminal cases

Ear Marking Edit

For 5 years from the law's enactment, all revenues will be set aside for infrastructure and social
programs only, with a 70% and 30% portion respectively.

Infrastructure Projects Edit

Infrastructure projects that will receive priority funding include the Build, Build, Build Program that
tackles the problem of congestion through the construction of public transport systems and road
networks and the refurbishing and enhancing of military facilities. Additionally, part of the 70% will be
allocated to the building of sports facilities in public schools as well as amenities that will allow access to
potable water in public spaces.[23]

Social Programs Edit

The social programs that will receive priority funding from 30% of revenues include:[23]

Programs for sugar farmers to increase productivity, provide livelihood opportunities, develop alternative
farming systems, and enhance farmer's income

Social mitigating measures and investments in education, health, social protection, employment, and
housing for poor and near-poor households

Unconditional cash transfer to the poorest 10 million households

Social benefits card to determine qualified beneficiaries (fuel vouchers for PUJs, fare discount for all
public utility vehicles, discounted purchase of NFA rice, free skills training under TESDA)

Unconditional cash transfers (UCT) Edit

In order to provide provisional protection for vulnerable households from the initial shock of the TRAIN
Law, unconditional cash transfers are dispensed. On the first year, beneficiaries receive Php200 per
month. In the succeeding 2 years, they receive P300 per month. The UCT is obtained from oil excise tax
revenues. In addition to the UCT, social welfare cards are provided to aid in continuous conferring of
benefits and subsidies to the poorest households. This includes subsidies for "medicine, transportation,
rice, and vocational trainings".[23]

Key provisions

Projected effects

Reception

See also

References

Last edited 15 days ago by AnomieBOT

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[23] "Package One - Complementary Measures • #TaxReformNow".