Explaining the Senate’s TRAIN

This is in response to Dr. Solita Collas-Monsod’s column, “More flawed than the House TRAIN” (9/23/2017), on the Senate’s version of the Tax Reform for Acceleration and Inclusion or TRAIN.

1. Contrary to the perception and claims that it is anti-poor, the Senate bill is an effort to temper the original proposals to cushion the effects of the tax reform on the poor. Cases in point:

a) Excluded kerosene because it is widely used as fuel for lighting and cooking by around 3 million households in far-flung areas, and imposed lower rate for LPG because it is commonly used by Filipino households for cooking. The reduction of proposed excise taxes on petroleum products is precisely to protect the poor as recommended by the Department of Social Welfare and Development.
b) Excluded milk and 3-in-1 coffee, which is mostly consumed by low-income earners. The Senate version also cuts the House proposal in half—from P10 per liter to P5 per liter for the first two years of implementation, then mandates a shift to a sugar content-based taxation (P0.05 per gram of sugar) for the succeeding years.

c) Retained the VAT exemption of socialized housing and leases below P12,800. Increased the VAT threshold from P1.9 million to P3 million—exempting small businesses with total annual sales of P3 million and below from paying VAT.

d) Income tax reform would benefit 99 percent of Filipino individual income taxpayers including entry-level teachers, nurses, soldiers, janitors, utility workers, clerks, and secretaries.

e) The increases in the final tax on foreign currency deposit units, capital gains tax for stocks not traded in stock exchange, and tax on dividend income are seen as among the most progressive reforms since it will only affect those who have the ability to pay additional taxes. Based on the Family Income and Expenditures Survey, 97 percent of dividend income and 74 percent of interest income belong only to the richest 20 percent of the population.

f) Made the earmarking provision more specific to directly benefit the poor. Under the Senate version, revenues will be allocated to: expanded cash transfers; free college law; free medicines for the poor; free outpatient care for indigents; expanded feeding programs for children and adults in areas with high hunger incidence; health programs for poorest households to address obesity, diabetes and other non-communicable diseases; provision of dialysis ward in government hospitals; subsidy for fisherfolk and technical assistance for sugar farmers, among others.

The Senate version retained the provision on expanded cash transfers for the poorest 50 percent Filipino households, and raised the amount and lengthened the period to P300 per month for three years from the original Department of Finance proposal of P200 per month just for one year.

2. The Senate listened to the proposals of nongovernment organizations and the health sector to increase the cigarette tax rates. However, their proposal is based on preliminary data and analysis with respect to the effects of the proposal particularly on revenues. It has been claimed that increasing the tax rate to P60 per pack will raise P68 billion in revenues. This is something that has to be looked at and observed carefully.

It is also important to note that the sin tax law already provides for an automatic indexation of tax rates, meaning they go up every year as it is. The sin tax collections fund our Philhealth premiums that enabled the government in recent years to cover more beneficiaries whereas previously, local governments had to shell out substantial amounts for the same.

3. A bill that can have significant impact on the mining industry, exports, employment, and the environment needs to be thoroughly discussed. The chairman and members of the Senate committee on ways and means have not been privy to the discussions on mining taxes in the past.

Senate Bill 1592, or the version of TRAIN which the committee recently sponsored, still has to run the gauntlet of interpellations from other senators, before being subjected to rigorous rounds of amendments and consolidated with the House version during a bicameral conference.

We are still in the initial stage. The general public, including Dr. Monsod, are still very much welcome to scrutinize the measure further.

FATIMA LIPP D. PANONTONGAN

Chief of Staff Office of Sen. Sonny Angara