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TRAIN – Tax reform for Acceleration and Inclusion effective 1 January 2018

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As everybody else are excited for the new tax reform, let us first know what it is all about.

 

What is TRAIN? Or what is Tax Reform for Acceleration and Inclusion?

 

 

As defined by Department Of Finance, “The Tax Reform for Acceleration and Inclusion (TRAIN) is the first package of the comprehensive tax reform program (CTRP) envisioned by President Duterte’s administration, which seeks to to correct a number of deficiencies in the tax system to make it simpler, fairer, and more efficient.

 

The goal of the first package of the Comprehensive Tax Reform Program (CTRP) or TRAIN is to create a more just, simple, and more effective system of tax collection, as per the constitution, where the rich will have a bigger contribution and the poor will benefit more from the government’s programs and services.”

 

Voting 17-1, the chamber passed Senate Bill 1592 or Tax Reform for Acceleration and Inclusion (TRAIN) on November 28 2017, after marathon deliberations. The tax reform bill was made effective last 1 January 2018. When the Senate approves tax reform bill on 3rd and final reading the first package of tax reforms proposed by the Duterte administration, seeking to increase Filipinos’ take-home pay while raising taxes on fuel, cars, housing, and sugar-sweetened beverages.

Also you may read, What will the tax reform fund.

 

The complementary measures will create for the government significant fiscal space estimated at some P133.8 billion in 2018 alone, representing 0.8 percent of the Gross Domestic Product (GDP). These estimate revenues will be used to improve the quality of infrastructure, housing, education, health and social protection.

 

Explicitly included in TRAIN is a time-bound earmarking of some of the gains from the fuel excise tax for the targeted cash transfers (TCT) program. The goal is to provide immediate and sufficient relief to poor and vulnerable families, and help them adjust smoothly to the temporary shock introduced by the new tax regime. The fund will come from a portion of the incremental revenues generated from the fuel excise tax.

 

Tax Administration

TRAIN also includes the following tax administration measures to complement reforms in tax policy:

• 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

Indeed, tax administration agencies need to be modernized and major reforms are needed. While much is still needed to be done, BIR has been developing and continually improving its e-systems, such as eBIRForms, Electronic Filing and Payment System, and mobile payments, to provide better services to the public and to minimize human intervention in tax collection. BIR also commits to simplify tax forms and processes to encourage taxpayer compliance.

 

Targeted Cash Transfer

Explicitly included in TRAIN is a time-bound earmarking of some of the gains from fuel excise tax for targeted cash transfers (TCT) to provide immediate and sufficient relief to poor families and help them adjust smoothly to the temporary shock introduced by the new tax regime. The fund will come from a portion of the incremental revenues generated from oil excise tax.

 

Public Utility Vehicle (PUV) Modernization

To mitigate the impact on fares, the tax reform will allocate funds for the PUV modernization program of the Department of Transportation (DOTr). This project aims to modernize the existing jeepneys to more efficient engines and bodies. The program estimates a 100% increase in fuel efficiency and a 40% reduction in emissions when using a Euro-4 engine compared to the present Euro-2. The tax reform will subsidize part of the equity to help jeepney drivers modernize their vehicles.

 

A few of the services aside from the above that are affected by the Tax reform are as follows:

Lowering the Personal Income Tax
Simplifying the Estate and Donor’s Tax
Expanding the Value-Added Tax (VAT) Base
Increasing the Excise Tax of Petroleum Products
Increasing the Excise Tax Automobiles
Introducing Increase the Tax of Sugar -Sweetened Beverages

 

News Source:
Department of Finance, republic of the Philippines : http://www.dof.gov.ph/taxreform/

 

Author: Expatch Editorial Team

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