Finally, The first package of the Tax Reform for Acceleration and Inclusion (TRAIN), the Duterte Administration's ambitious program to help alleviate poverty and fuel the Philippines' physical and social infrastructure backbone, has kicked off.
The package of tax adjustments, the first since 1997's Comprehensive Tax Reform Program (CTRP), provides personal income tax (PIT) exemptions for the first P250,000 of taxable income, along with other significant PIT cuts for other tax brackets, giving the Filipino taxpayer “much-needed relief.” That means no income taxes for about 7 million Filipinos.
Apart from addressing long-standing criticism that Filipinos are the most taxed among their ASEAN counterparts, the total amount of relief to be given back to the people is computed by the finance department at “almost P150 billion."
This money that remains in Filipinos' pockets is hoped to flow into additional purchases of goods and services that, in turn, will boost domestic consumption and further drive economic growth.
While achieving relief, 70% of the incremental revenues under the TRAIN will help support the government’s infrastructure modernization program, which will also include strengthening the country’s military and law enforcement capabilities. This helps calm the feared debt dependence on foreign loans to fund the "Build, Build,Build" initiative.
At the same time, the TRAIN also hopes to achieve redemption for the poor by raising “significant revenues” to fund the President’s priority and social infra programs to reduce poverty from 21.6 percent to a targeted 14 percent by 2022.
Concretely, it allocates 30% of incremental revenues to social services to fund, among other anti-poverty measures, a targeted cash transfer program for the poorest 10 million households.
As these three hopes are articulated, what remains is to be seen is that whether or not all these are fulfilled over time.
The key is in monitoring that the new system will indeed become more transparent and less tedious. For example, long clamored-for but now possible simplified systems such as an 8% flat tax on gross for professionals and a higher VAT threshold for MSMEs should be ensured not only by government but by a vigilant citizenry.
With these, the biggest hope attached to the TRAIN is the possibility that our tax system, indeed our government, will achieve redemption as it gears up to forge a new and more credible way of collecting and spending the people's money.