Soc Sci IV:: Basic Economics With Agrarian Reform and Taxation

Soc Sci IV:
BASIC ECONOMICS
WITH AGRARIAN
REFORM AND
TAXATION
Cherrylyn P. Labayo, MEcon, M-AE.
Instructor
https://taxreform.dof.gov.ph/tax-reform-packages/p1-train/
TRAIN
PACKAGE 1
✓ seeks to correct a number of deficiencies in the tax
system to make it simpler, fairer, and more efficient
✓ corrects the longstanding inequity of the tax system by

reducing income taxes for 99 percent of income
taxpayers, thereby giving them much-needed relief
after 20 years of non-adjustment.
✓ raises significant revenues to fund the President’s

priority infrastructure programs to reduce poverty
incidence from 21.6 percent in 2015 to 14 percent by
2022.
TRAIN
PACKAGE 1
✓ 70 percent of the incremental revenues of TRAIN will

go to infrastructure and the Build, Build, Build program,
while the balance will go to social services programs.
TRAIN
LEGISLATIVE STATUS
✓ Passed into law on 19 December 2017
TRAIN
SALIENT PROVISIONS
✓ Lowered and simplified personal income taxes

✓ Simplified tax for small and micro self-employed and
professional (SEPS) taxpayers
✓ Unconditional cash transfers
✓ Simplified estate and donor’s taxes
✓ Expanded the value-added tax (VAT) base
✓ Adjusted oil excise taxes
✓ Adjusted automobile excise taxes
✓ Introduced excise tax on sweetened beverages
✓ Other taxes
TRAIN
LOWERED AND SIMPLIFIED
PERSONAL INCOME TAXES
✓ Those with annual taxable income below PHP
250,000 are now exempt from paying personal
income tax
✓ The rest of taxpayers, except the richest, will see
lower tax rates ranging from 15 percent to 30 percent
by 2023.
✓ To maintain progressivity, the top individual taxpayers
whose annual taxable income exceeds PHP 8 million
face a higher tax rate of 35 percent from the current
32 percent.
Differences of TRAIN vs. Old Income Tax Tables
Compared to the old tax rates which were in use until the end
of 2017, the new tax rates implemented by the Bureau of
Internal Revenue (BIR):
1. Streamlined the income tax brackets and reduced the

brackets to six (6);
2. Adjusted upwards the taxable income threshold per
bracket;
3. Revised the tax rate charged on each taxable income
bracket;
4. Raised the annual gross income eligible for tax exemption;
and
5. Removed the personal exemption (P50,000) and additional
exemptions (maximum of P100,000 if taxpayer has four
dependents). Source:https://www.pinoymoneytalk.com/old-income-tax-rates-nirc-tax-tables/
❑ Under the new income tax reform, salaried
individuals earning gross compensation of
P250,000 or below per year are exempted from
paying income taxes. This is a drastic change
from the past, wherein only the minimum wage
earners were exempted.
❑ In addition, the new BIR tax reform removed

the personal exemption — amounting to P50,000
— and additional exemption of P25,000 per
qualified dependent — maximum of 4 dependents,
so maximum of P100,000 additional exemptions —
enjoyed by taxpayers in the old system.
Source:https://www.pinoymoneytalk.com/old-income-tax-rates-nirc-tax-tables/
Old BIR Income tax Rates (Used until 2017)
New BIR Income Tax Rates, from TRAIN Tax Reform (2018-2022)
New BIR Income Tax Rates, from TRAIN Tax Reform (2023-onwards)
TRAIN
Simplified tax for small and micro self-employed
and professional (SEPS) taxpayers
✓ Small and micro SEPs now have the option to pay a
simpler, flat tax of eight percent on gross sales in lieu
of the income and percentage tax. Taxpayers can
save time falling in line and filing and paying eight
times a year to just four times a year.
TRAIN
UNCONDITIONAL CASH TRANSFERS
✓ The ten million poorest households and individuals

receive cash transfers of PHP 200 per month in 2018
and PHP 300 per month in 2019 and 2020. The
amount is enough to offset the moderate but
temporary increase in prices due to TRAIN.
TRAIN
SIMPLIFIED ESTATE AND DONOR’S TAXES
✓ Estate tax is lowered from 20 percent to a single rate

of six percent for net estate with standard deduction
of PHP 5 million as well as exemption for the first
PHP 10 million for the family home.
✓ On the other hand, donor’s taxes are lowered from up

to 15 percent to a single rate of six percent of net
donations above PHP 250,000 percent yearly.
TRAIN
EXPANDED THE VALUE-ADDED TAX (VAT) BASE
✓ Fifty-four special laws with non-essential VAT

exemptions were repealed, thereby making the VAT
system fairer. For the average Filipino, this does not
have an impact on them, as the VAT exemption
removal only affects groups enjoying exemptions.
✓ Exceptions in tax code: cooperatives (except electric

cooperatives), VAT on medicines for diabetes, high
cholesterol, and hypertension, and condominium and
association dues
TRAIN
EXPANDED THE VALUE-ADDED TAX (VAT) BASE
✓ Exceptions in special laws: PAGCOR and casino,

domestic coal, renewable energy, credit surety,
countryside barangay business enterprise, mini-
hydro, and tourism
✓ Starting 2021, move from final to creditable
withholding VAT
✓ Starting in 2022, move from five-year spreading of
capital input VAT to immediate expensing.
✓ Starting 2023, move from monthly to quarterly VAT
filing and payment.
TRAIN
ADJUSTED OIL EXCISE TAXES
✓ There was a staggered increase of oil excise tax by
up to PHP 6 per liter over a three-year period, with
lower rates for essentials such as diesel, kerosene,
and LPG to protect households and commuters.
✓ In 2018, gasoline excise tax (including additional
VAT) rose by only PHP 2.97 per liter.
✓ In 2018, diesel excise tax (including additional VAT)
rose by only PHP 2.8 per liter. This should not
warrant a fare hike.
✓ PUV operators and drivers can avail of social
assistance program.
TRAIN
ADJUSTED AUTOMOBILE EXCISE TAXES
✓ Adjustment of automobile tax rates is based on the net
manufacturing or importer’s price, which is as follows:
✓ Four percent (for automobiles up to PHP 600,000)
✓ 10 percent (for automobiles above PHP 600,000 to 1
million)
✓ 20 percent (for automobiles above PHP 1 million to 4
million)
✓ 50 percent (for automobiles above PHP 4 million).
✓ Pick-ups and purely electric vehicles are fully exempt,
while hybrid cars are taxed at 50 percent of the
equivalent automobile. https://taxreform.dof.gov.ph/tax-reform-packages/p1-train/
TRAIN
INTRODUCED EXCISE TAX ON
SWEETENED BEVERAGES
✓ PHP 6 per liter for drinks containing caloric or non-

caloric sweetener, and PHP 12 per liter for drinks
containing high-fructose corn syrup or combination. 3-
in-1 coffee and milk, among others, are exempt.
TRAIN
OTHER TAXES
✓ Mining excise tax – double the rates from two percent
to four percent.
✓ Cosmetic excise tax – a new tax at five percent of

gross receipts.
✓ Documentary stamp tax – 50 to 100 percent increase

except for property, savings, and non-life insurance.
✓ Foreign currency deposit unit (FCDU) – increased from

7.5 percent to 15 percent final tax on interest income.
TRAIN
OTHER TAXES
✓ Capital gains of non-traded stock – increased from five

to ten percent, to 15 percent final tax on net gains.
✓ Stock transaction tax – increased from 0.5 percent to

0.6 percent of the transaction value.
TRAIN
OTHER TAXES
✓ Tobacco excise tax – increase the rate from PHP 31.2
per pack in 2018 to P 32.5 between January to June
2018, PHP 35 per pack from July 2018 to December
2019, PHP 37.5 per pack in 2020 and 2021, and PHP
40 per pack in 2022 and 2023, followed by annual
indexation of four percent.
TRAIN
What will TRAIN fund?
✓ Vat-exempt medicines
✓ Education
✓ Healthcare
✓ Infrastructure
✓ Social mitigating measures
✓ Pantawid Pasada Program (PPP)
TRAIN
VAT-EXEMPT MEDICINES
✓ Effective January 1, 2019,
people can start availing of
VAT-exempt medicine for
diabetes, high cholesterol,
and hypertension
✓ https://www.doh.gov.ph/VAT
-Exempted-Drugs-List
TRAIN
EDUCATION
✓ TRAIN aims to create a more conducive learning
environment with the ideal teacher-to-student ratio and
classroom-to-student ratio.
✓ With this, TRAIN aims to:

❑ Achieve 100 percent enrollment and completion
rates
❑ Build 113,554 more classrooms
❑ Hire 181,980 more teachers between 2017 and
2020
TRAIN
HEALTHCARE
✓ better quality healthcare services
✓ With this, TRAIN aims to:
❑ Upgrade 704 local hospitals and establish 25 local hospitals
❑ Achieve 100 percent Philhealth coverage and higher quality of services
❑ Upgrade and/or relocate 263 rural and urban health units to disaster-
resilient facilities
❑ Build 15,988 new barangay health stations
❑ Build 2,424 new rural health units and urban health centers
❑ Between 2017 and 2022, hire an additional 2,424 doctors, 29,466 nurses,
1,114 dentists, 3,288 pharmacists, 2,682 medical technologists, 911 public
health associates, and 2,497 UHC implementers
TRAIN
INFRASTRUCTURE
✓ Additional revenues collected are used to fund projects of the
Build, Build, Build program of the Department of Public Works
and Highways (DPWH).
✓ Major projects are:
❑ Bonifacio Global City-Ortigas Center Link Road
❑ UP-Miriam-Ateneo Viaduct along C-5/Katipunan
❑ Camarines Sur/Albay Diversion Road
❑ Pulilan-Baliuag Diversion Road
❑ Maasin City Coastal Bypass Road cum Sea Wall
❑ Tacloban City By-Pass Road
TRAIN
INFRASTRUCTURE
❑ Panay East-West Road
❑ Daang Maharlika (Alternate Route) (NRJ-Mayor Democrito D.
Plaza II Avenue-Las Nieves-Sibagat), (Mandamo-Las Nieves
Section)
❑ Cagayan De Oro Diversion Road, Cagayan De Oro City
❑ Valencia City-Pangantucan Diversion Road
❑ Concretize 3,741 km of national gravel roads, 10,473 km of
national asphalt roads, 30,209 km of local gravel roads
❑ Irrigate 1.3 million hectares of land
❑ Provide 7,834 isolated barangays and 23,293 isolated sitios
with road access
TRAIN
INFRASTRUCTURE
TRAIN
SOCIAL MITIGATING MEASURES
✓ To help Filipinos cope with the changes brought about
by TRAIN, the following measures were implemented:
✓ Unconditional Cash Transfers (UCT)

❑ UCT is a cash subsidy provided under TRAIN to
alleviate the impact of fuel excise increase on the
poorest 10 million households or individuals.
❑ As of April 12, 2019, more than PHP 22 billion has
been distributed to more than nine million
beneficiaries.
TRAIN
SOCIAL MITIGATING MEASURES
The pool of UCT beneficiaries is composed of (a) households in
the Pantawid Pamilyang Pilipino Program (4Ps), (b) beneficiaries of
the Social Pension Program under the Senior Citizens Act, and (c)
other poor households as identified by the Department of Social
Welfare and Development (DSWD) through the National Household
Targeting System for Poverty Reduction (NHTS-TR), also known
as Listahanan.
DSWD, the government agency in charge of administering the

cash transfers, plans to release 3,600 pesos per household, to the
million poorest households around June next year. This is much
earlier than the projected completion of this year’s unconditional
cash transfers which is expected to be completed in mid-September.
https://www.dbm.gov.ph/index.php/secretary-s-corner/press-releases/list-
of-press-releases/1144-p36-b-allocated-for-cash-transfers-in-2019
TRAIN
PANTAWID PASADA PROGRAM (PPP)
✓ The PPP distributed fuel vouchers to qualified
franchise holders of public utility jeepneys (PUJs) to
partially offset the impact of higher excise taxes on
fuel products as well as to partially compensate for
the decrease in income brought by the fare discounts.
✓ As of May 28, 2019, around PHP 518 million-worth of

fuel cards were distributed to 103,567 beneficiaries.
TRAIN
https://news.abs-cbn.com/news/02/22/19/p20k-fuel-
subsidy-for-qualified-jeepney-drivers-in-2019-ltfrb
TRAIN
https://www.doe.gov.ph/press-releases/doe-gears-pantawid-pasada-reloading
TRAIN TAX MYTHS
TRAIN TAX MYTHS
#7:
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Soc Sci IV:

✓ corrects the longstanding inequity of the tax system by

✓ raises significant revenues to fund the President’s

✓ 70 percent of the incremental revenues of TRAIN will

✓ Passed into law on 19 December 2017

✓ Lowered and simplified personal income taxes

1. Streamlined the income tax brackets and reduced the

❑ In addition, the new BIR tax reform removed

✓ The ten million poorest households and individuals

✓ Estate tax is lowered from 20 percent to a single rate

✓ On the other hand, donor’s taxes are lowered from up

✓ Fifty-four special laws with non-essential VAT

✓ Exceptions in tax code: cooperatives (except electric

✓ Exceptions in special laws: PAGCOR and casino,

✓ PHP 6 per liter for drinks containing caloric or non-

✓ Cosmetic excise tax – a new tax at five percent of

✓ Documentary stamp tax – 50 to 100 percent increase

✓ Foreign currency deposit unit (FCDU) – increased from

✓ Capital gains of non-traded stock – increased from five

✓ Stock transaction tax – increased from 0.5 percent to

✓ With this, TRAIN aims to:

✓ Unconditional Cash Transfers (UCT)

DSWD, the government agency in charge of administering the

✓ As of May 28, 2019, around PHP 518 million-worth of

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