The Tax Reform for Acceleration and Inclusion (TRAIN) is expected to make our tax system simpler, fairer and more efficient. The substantial cuts in personal income tax will definitely increase the take-home pay of all individuals earning above minimum wage, but not more than P8 million a year.
The TRAIN, however, is not all gains for us, as the government aims to generate an additional P89.9 billion in revenues from the broadening of the value-added tax (VAT) base, adjusting excise taxes on fuel, coal, automobiles and tobacco products, and introducing a tax on sugar-sweetened beverages (SSBs) except for milk and coffee.
Any increase in prices due to the imposition of excise tax is manageable for those who will receive a higher take-home pay, if they will reduce or avoid smoking and drinking soft drinks, and defer any plan to buy new cars.
Employers may also extend a hand to their employees by releasing the maximum tax-exempt de minimis benefits amounting to at least P63,000 and additional incentive or bonus up to P90,000 less 13th month pay, on top of their monthly basic salary.
However, for the minimum wage earners and unemployed, the government must expedite the release of promised subsidies.
The TRAIN includes earmarking for social protection programs, such as targeted unconditional cash transfers to benefit the poorest 10 million households in the country and a social welfare card for discounts on medicine, transportation, rice, and vocational training.
But the real gain or the big win here will come when the government efficiently spends the higher budget on the improvement of public transportation, education, health care and infrastructure in the country.
The low voluntary tax compliance of self-employed and professionals, who are significantly earning more than fixed-income earners (or employees), can be attributed partly to the growing sentiment that we pay first world taxes but get third world public services in the Philippines.
Hopefully, with the optional 8 percent flat rate in lieu of income and percentage tax for self-employed and professionals (SEPs) earning P3 million and below gross sales/receipts, more SEPs will start paying the right taxes given that they will only have to file and pay on a quarterly basis, with their first P250,000 tax-exempt, like the employees.
After the public consultation conducted by the Bureau of Internal Revenue (BIR), we are expecting the release of the implementing rules and regulations (IRR) for the full implementation of the TRAIN law.
However, BIR Commissioner Caesar Dulay reiterated that with the issuance of RMC 105-2017, employers must not wait for the IRR to use the revised withholding tax table exempting employees receiving monthly salary of P21,000 and below, and increasing the take home pay for the majority of employees.
But these are not all, as the approved TRAIN law is just two-thirds of package one, as the remaining one-third involves provisions on the estate tax amnesty, a general tax amnesty, the proposed adjustments in the Motor Vehicle Users Charge and amendments to the bank secrecy law and automatic exchange of information.
According to the Department of Finance (DOF), this will generate an additional P38.9 billion in revenues, of which P26 billion will come from the amnesty program.
Package 2, meanwhile, will include the lowering of corporate income tax and revisiting of the fiscal incentives.
With all this coming, all taxpayers, both individuals and corporations, must commit to pay the right taxes with proper tax planning to enjoy the benefits of the TRAIN law.
All this may seem too much to swallow for now, but with the pain comes the promise of bigger gains down the road. —CONTRIBUTED
If you want to know more on how to prepare for and benefit from the TRAIN law, e-mail us at consult@acg.ph or call us at (02) 6227720.