Finance Secretary Carlos Dominguez III said even non-wage earners who will not get tax breaks under the proposed Tax Reform for Acceleration and Inclusion Act (TRAIN) will still benefit greatly from it in the form of better infrastructure, more jobs and expanded access to education, health and other social services that will be partly funded by this reform package.
Contrary to claims by some quarters that 50 percent of the population who are non-taxpayers would be left out once the TRAIN is enacted into law, Dominguez said that aside from better living conditions, the tax reform bill would also provide the poor and other sectors vulnerable to its initial impact with cash transfers and other forms of assistance to help lift themselves out of extreme poverty.
“I’m sorry, that is wrong (a wrong perception). People who are not paying taxes are going to benefit. Why? Number one, they are going to get better roads, they’re going to get a better education, they’re going to get better job opportunities. So I want to dispel this notion that people who don’t pay taxes are not going to benefit from the tax reform program,” Dominguez said at a recent forum of the American Chamber of Commerce in the Philippines (AmCham).
Under the proposed TRAIN or House Bill 5636 approved by the House of Representatives last May 31, 40 percent of the annual incremental increase from oil excise taxes will go to social mitigating measures such as targeted cash transfers for the poorest families, public utility (PU) operators and drivers, and electricity consumers in Small Power Utilities Group (SPUG) areas or those not connected to the main transmission system.
The balance of 60 percent, will fund projects on infrastructure, education, health, housing, and social protection.
The Senate ways and means committee is currently conducting deliberations on its version of the TRAIN or Senate Bill 1408 filed by Senate President Aquilino Pimentel III.
Dominguez pointed out that the Duterte administration’s ultimate goals in pushing tax reform are to sustain the pace of economic growth to 7 percent or better, bring down the poverty rate to 14 percent in the medium term, and pave the way for the country’s rise to a high middle-income economy by 2022.
He bared that tax reform will help build or improve 44,000 kilometers of national and local roads, attain 100 percent PhilHealth coverage, construct more local hospitals and improve existing ones, and achieve the ideal teacher-to-student and student-to-classroom ratios for the benefit of the country’s future workforce.
Finance Undersecretary Karl Kendrick Chua said that under HB 5636, the targeted program for over 10 million households involves unconditional transfers (UCTs) of P2,400 for one year.
The UCT will be considered a “top-up” on the existing cash transfers received by the current 4.8 million beneficiaries under the 4Ps.
Chua said an additional 5.2 million households will also be covered by the UCT program but they would have to register and issued identification cards to ensure that only the intended beneficiaries get to receive the benefit.
For public utility jeepney (PUJ) drivers, the government will revive the Pantawid Pasada Program, which will provide those with valid franchised vehicles cash cards to lessen the effects of the potential slight increase in fuel costs due to the higher excise tax.
An alternative solution to mitigate the impact of oil excises on PUJs is the Jeepney Modernization Program that aims to replace 220,000 jeepneys, including 70,000 in Metro Manila, that is 15 years old and above, with more fuel-efficient vehicles.
“The Pantawid Kuryente Program, which will focus on lifeline consumers in SPUG areas that use diesel or bunker fuel to power their communities, will not involve any financing because this will be cross-subsidized by richer households,” Chua said.
Households covered by the Pantawid Kuryente are those which consume less than 100 kilowatts per hour.
Under TRAIN, the first P250,000 in the taxable income of compensation earners will be exempted from the personal income tax (PIT) with families receiving a combined monthly income of up to P42,000 increasing their take-home pay by up to P3,500 per month according to computations made by the Department of Finance (DOF).
DOF computations show that even with the slightly higher expenses that taxpayers would incur under the TRAIN’s revenue-enhancing provisions, the increases in their take-home pay would more than offset these additional costs.
These revenue-enhancing provisions include expanding the value-added tax (VAT) base, and adjusting the tax for fuel and automobiles and imposing a tax on sugar-sweetened beverages, among other measures.
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