The Tax Reform for Acceleration and Inclusion or TRAIN program proposed by the Duterte administration would ultimately “reduce poverty to single digits, grow the economy by 9 percent, and transform the Philippines into an Asian economic powerhouse by 2028, with $1.2 trillion in Gross Domestic Product.”
Albay Rep. Joey Sarte Salceda, the original proponent of TRAIN or House Bill 4688, said the measure will “fairly and effectively” transfer some P170 billion annually from the country’s rich to middle class and low income households.
The House Committee on Ways and Means has merged Salceda’s HB 4688 with another tax reform measure, HB 4774, authored by Quirino Rep. Dakila Carlo Cua, but retained most of TRAIN’s provisions as originally designed, among them unconditional cash transfers to indigent families for three years.
Both bills aim to lower the personal income tax rates for 99 percent of the country’s taxpayers, while expanding the VAT base and adjusting consumption taxes rates on petroleum products and automobiles.
Congress aims to pass the measure this year as the Tax Administrative Reform Act of 2017.
Under TRAIN, Salceda said 40 percent of its generated revenue “will go to the Internal Revenue Allotments of barangays, towns, cities, provinces. and the Autonomous Region in Muslim Mindanao.”
Its pro-poor feature, the lawmaker said, has earned it “unprecedented support” from government and private sectors, non-government organizations and civil society groups, making it “a better understood and appreciated proposed piece of legislation.”
TRAIN, Salceda added, is seen to break the margin of inequality and injustice between the marginalized and the elite. It would also amend the decades-old tax schedule for personal income, one of the highest within the Asean.
The tax reform measure is a “comprehensive resource equalizer” and represents the single largest direct transfer of wealth mechanism via reduced personal income taxes, the Albay solon said.
Salceda has been at the forefront of a series of tax reform roadshows with the Department of Finance and various sectors around the country, aimed at “deepening people’s understanding” of the measure and the advantages it would bring about for the country.
To ensure it is properly understood and appreciated, the lawmaker has initiated dialogues with local government and business sectors, civil society and NGO leaders in key areas of the country.
The TRAIN roadshow has made over 90 stops, the latest at Shangri-La Makati conducted with Finance Secretary Sonny Dominguez and leaders of the Philippine Chamber of Commerce and Industry.
A noted economist and veteran finance reform advocate, Salceda said he had hosted 178 similar meetings around the country in 2004 to 2005, during the campaign for the Reformed Value-Added Tax of the administration of then-President Gloria Macapagal Arroyo.
He said TRAIN has instantly gained the support of the country’s leading economists, former and current DoF and NEDA officials and business organization leaders. The changes TRAIN would bring about, he said, will eventually qualify the country for membership in the Organization for Economic Cooperation and Development.
Salceda, senior vice chair of the House Committee on Ways and Means and vice chair of the Committee on Economic Affairs, said the first package of tax reforms seeks PIT rate cuts while adjusting rates of consumption taxes to current inflation.
It will ensure that “74 percent of the annual increasing nominal GDP that goes only to the country’s richest 10 percent” would be taxed and the “additional revenues go to the poor by way of unconditional cash transfers and other subsidy programs,” he said.
He said TRAIN “is the only way to make the tax system more efficient, equitable and pro-poor, as the government cannot exclusively tax the rich because such a measure would be immediately struck down as class legislation.”
Based on calculations, Salceda said the tax reform bills they propose will have an annual total monetary impact of P354 on the country’s poorest households.
Thus, under TRAIN, the poor will get back 10 to 30 years of their total contribution to the tax reform package immediately in the form of targeted transfers.