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A more modest tax collection goal

HOUSE bill 5636 is being touted by the administration as a reform bill with the name “Tax Reform for Acceleration and Inclusion Act” (TRAIN). Reform is always a good word, while Acceleration denotes an active go-go government – as in the previous administration’s Disbursement Acceleration Program – and Inclusion seeks to imply that the poorer sectors of the country will now be included in the benefits of national economic progress.

Many critics, however, have pointed out that while there is indeed reform in certain provisions of the tax bill, most of it seems to be more about raising money in the billions through taxes that will hit the masses of Filipino workers through higher consumer prices and higher passenger fares.

The reform part of TRAIN consists of the lowering of personal income taxes from the current 32% to 25%. Those earning P250,000 a year and below will pay no tax, while the “ultra-rich” will pay 35%. The bill is welcomed as a reform measure by the bulk of salaried employees. With the lowering of tax rates, the government estimates it will lose some P200 billion in current tax collections.

To make up for the loss, TRAIN proposes several new ways to collect additional funds from the people and business enterprises. It would impose higher taxes on gasoline and other refined petroleum products. This is bound to raise the prices of consumer goods transported on trucks from the provinces. VAT exemptions now enjoyed by many sectors will be removed. A new excise tax on sugar-sweetened beverages will be imposed, although this is more of a health than a tax bill.

The additional income for the government as a result of these new taxes has been estimated at one time at P500 billion. Subtracting the P200-billion loss from lowered income tax rates, the government would net P300 billion a year at the end of the three-year period of graduated implementation of TRAIN. Last Tuesday, the Department of Finance (DoF) said its latest estimates put the increase in government income from the tax bill at P1.16 trillion in five years, an average of P230 billion a year.

House bill 5636 now goes to the Senate which has vowed to thoroughly examine the bill, particularly the provisions increasing the tax on fuel which would hit the farming and fishing sector and, ultimately, the masses of ordinary rice and fish eating people.

We renew our appeal to our legislators to keep the poor folk in mind in their decisions. House bill 5636 by the latest DoF estimate will net the government an additional P230 billion yearly at the end of the three-year period.

Perhaps a more modest goal could be set so that the impact on the people will not be so much.

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