Tax the Rich, Feed the Poor

https://www.youtube.com/watch?v=1M5kME29xNs

The Tax Reform for Acceleration and Inclusion (TRAIN) as Republic Act (RA) No. 10963 - Package 1 was signed into law by current President Rodrigo Duterte on December 19, 2017.

It aims to fund the Build Build Build Project of the current administration. It was also stated that it would help sustain the high and wide-ranging growth of the country. It contains tax reforms such as modifications to the National Internal Revenue Code of 1997's provisions on personal income taxation, passive income for both persons and corporations, estate tax, donor's tax, VAT, excise tax, documentary stamp tax (DST), and tax administration. (DOF, 2018).

Based on Punongbayan (2019), TRAIN's proponents used to make a good impression about enhancing the tax system's "progressivity," which would be heavier on the wealthy while lighter on the poor. Tax reform may be a potent tool for the government to level the field between the rich and the poor. However, data suggests that TRAIN had the opposite effect. Even so, those who work in the informal sector who are exempted from the personal income tax like minimum wage earners (taho vendors and pedicab drivers) still suffer from the implemented law due to the inflation rates on sweetened beverages (sweetened tea, flavored water, all carbonated beverages, energy/sports drinks, cereal, and grain beverages, powdered drinks that are not classified as milk, juice, tea, and coffee, as well as other non-alcoholic beverages with added sugar). These went from Php6.00 per liter of volume capacity to Php12.00. These cigarettes went from Php30.00 per pack to Php40.00 (which generally increases by 4% every year). Also, the excise tax rates increased on domestic and imported coal and coke in 3 tranches, such as Php10.00 per metric ton from the old tax rate. As of 2020, it became Php150.00 for the mineral product (coal and coke) because of RA 10963 or TRAIN Law. Most mineral products such as metallic minerals and quarry resources, copper, gold and chromite, and indigenous petroleum increased its' old tax rates from 2% to 4% new tax rate.

Meanwhile, the Documentary Stamp Tax (DST) had increased the rates by 100%. However, DST on debt instruments (Section 179) is exempted, which only increases by 50%, as well as the DST on policies of insurance upon property (Sec. 184). Moreover, fidelity bonds and other insurance (Sec. 185), indemnity bonds (Sec. 187), and deeds of sale, conveyances, and donation of real property (Sec. 196) remain unchanged. Under the extended foreign currency deposit system, the currency deposit unit (FCDU) boosted a person's or domestic firm's interest income from 7.5% to 15%. While so, capital gains on non-traded stocks went from a 5% -10% tax rate to a 15% single tax rate on net capital gains. STT increases from 0.5% to 0.6% of the gross selling price of shares sold, bartered, exchanged, or disposed of through a local stock exchange.

Moreover, the cosmetic procedures had a new excise tax equivalent to 5% of gross receipts, net excise tax, and VAT. Al petroleum products increased from their old tax rates; for example, the lubricating oils and greases went from old tax rates of Php4.50 to new tax rates as of 2020 of Php10.00. Furthermore, such changes on excise tax on automobiles were imposed directly on the net manufacturer's price instead of a marginal tax rate. However, RA 10963 broadened the VAT base. It repealed 54 provisions on VAT exemption and zero-rating under special laws and included electric cooperatives in the sale definition. (DOF, 2018).

According to Dr. Karl Kendrick Chua, Undersecretary of the Department of Finance, the law intends to eliminate poverty by investing more in infrastructure to help address economic concerns regarding education, housing, traffic, and health. According to the study results, 650 to 1080 will be decreased from 60% of the poorest household, according to Sonny Africa (Executive Director of IBON Foundation). The direct effect will be on kerosene, LPG, sweetened beverages, and inflationary effects, implying that the price hike on petroleum goods will have a domino effect on commodity prices. According to the study's findings, a farmer who consumes rice, sugar, sweetened beverages, and petrol can lose Php600 per month and only earn Php7000 per month. (GMA Public Affairs, 2018).

With all the natural and agricultural resources of the Philippines, it is still known as a third-world country. Many former Philippine presidents like Diosdado Macapagal and Ramon Magsaysay had initiatives to foster Philippine agriculture and support Filipino farmers. They attempted to implement agrarian reforms to resolve poverty, agricultural issues, and economic problems. However, such efforts were not maintained and sufficient to ease the said issues. The discourse that the Philippines and its' people are poor is weakly elaborated. It is an insult to our custom wealth and resources, which is one of the reasons why we had been colonized and exploited before. Our country's resources are poorly managed and distributed. Some Filipinos lack in-depth understanding and fail to recognize that our country is abundant with several natural resources. It is beneath our awareness that these are being misused and corrupted by other people in the government. Also, when we say that our country is poor, it makes us think that we need to lessen our expectations from the government—being an excuse for not demanding accountability and transparency to the salient features of corruption of other politicians in the government. It is more reasonable to assert that we are denied equity and fairness. We are deprived of resources that we should have been consuming and to which we should have had access. The majority of agricultural items we consume and purchase in the market are imported. While our Filipino farmers' labor products are mainly exported, most will go to waste due to inadequate distribution and management. (Lasco, 2021).

In my perspective, the TRAIN Law does not favor the poor and does the opposite to the rich. Those in the middle class may not grasp how this might still have a negative impact on them now that their income tax has been decreased. However, even we — struggling students are experiencing the effects of this economic dilemma. A daily allotment of 150 pesos for school is insufficient for food and transportation. However, it is anticipated that money will eventually lower its' value.

On the other hand, the TRAIN Law is accelerating the process. During this pandemic, money is primarily valuable in terms of food, education, and shelter. With the recent price increases in the food market, more Filipino families in the middle, working, and lower classes are significantly affected. Before, a Php500 could buy a kilo of rice, pork, and some sinigang ingredients. Now, with a Php500 bill, however, you can hardly buy pork and ingredients.

Moreover, given the fact that not all Filipino families have a hundred five pesos bill in their pocket, it worsens these families' living conditions. The law seemed good as imagined; even so, we must express our constructive criticisms about the reality of this mandated law. It will not just benefit us, but it can also help improve our fellow countrymen's hunger and economic deprivation issues.

References

Department of Finance. (2018). Tax Changes You Need to Know: Republic Act No. 10963 Tax Reform for Acceleration and Inclusion (TRAIN). Retrieved from: https://ntrc.gov.ph/images/train/Tax-Changes-You-Need-to-Know-under-RA-10963.pdf

De Vera, B. (2019). More Filipinos dragged into poverty by higher taxes under TRAIN. Inquirer.Net Business. Retrieved from: https://business.inquirer.net/282231/more-filipinos-dragged-into-poverty-by-higher-taxes-under-train#ixzz7AJkkNkRn

GMA Public Affairs. (2018). Brigada: Epekto ng TRAIN Law sa mga Pilipino, tinalakay sa 'Brigada.’ Retrieved from: https://www.youtube.com/watch?v=3JfVX6DMuls

Lasco, G. (2021). The Philippines is not a poor country. Inquirer.Net Business. Retrieved from: https://opinion.inquirer.net/136616/the-philippines-is-not-a-poor-country

Punongbayan, JC. (2019). [ANALYSIS] How the TRAIN law worsened poverty, inequality. Rappler. https://www.rappler.com/voices/thought-leaders/how-tax-reform-law-worsened-poverty-inequality-philippines