The TRAIN Law and You: In a Nutshell
Derivative work: Beao, WIkimedia Commons
As a citizen of the Republic of the Philippines you must have heard about Republic Act RA 10963 or Tax Reform for Acceleration and Inclusion or the TRAIN law. But what is it about? Read on.
Well, aside from seeing your favorite drink get more expensive, there are a lot of things it is actually doing for the economy. It is basically just a more effective way of collecting tax within the country. It increases tax imposed on the rich and ensures more benefits and services for the poor.
Lowers Personal Income Tax of People
Screenshot of DOF.gov.ph/taxreform
It is commonly known for lowering the personal income tax (PIT) of the people, excluding the rich, simplifying estate and donors tax, and increasing excise tax on automobiles, sweetened beverages and petroleum products. Aside from those changes, the law also increases the tax on documents, minerals, cigarette, non-essential services and the tax exemption of PCSO winnings amounting more than 10,000 pesos.
Those earning below 250,000 pesos per annum—minimum wage earners-- are exempt from paying PIT; those earning above 250,000 pesos per annum will see a decrease in tax rates from 15% to 30% by 2030, while those whose incomes are 800 million pesos and above, annually, are taxed with a higher rate of 35%.
The self-employed or professionals with gross sales below the VAT threshold have the option to pay an 8% flat tax while those above the threshold will follow the PIT schedule.
This new tax structure might even discourage minimum wage earners to accept incremental wage increase because if their income even goes a peso up the 250,000 peso mark, it will lower an effective take home pay and we don’t want that now, do we?
Image by gnokii at openclipart.org, Wikimedia Commons
You may read more about the TRAIN Law at http://www.dof.gov.ph/taxreform/
In their Tax Myths section, you will find some answers (straight from the government) to common myths such as:
- The poor are set to become poorer because of this tax reform
- Prices of commodities and transport cause will skyrocket due to the rise in oil excise
- This law is basically anti-poor
- The solution should just be to lower personal income taxes
Hope this will be a food for thought the next time you’ll buy a drink—and whine about how the TRAIN law is boring an even bigger hole in your pocket.