Reflection Paper: Tax Awareness 2019

Last February 29, a seminar entitled as “Tax Awareness 2019” was held at the Barrion Hall
of St. Scholastica’s College – Manila as part of the Junior Philippine Institute of Accountants’
celebration of organization week. A resource speaker from the Bureau of Internal Revenue invited
by the officers of the said organization to give the talk. The speaker tackled about the topic of the
newly implemented law; the Tax Reform for Acceleration and Inclusion, most commonly known
by many Filipinos as the TRAIN Law.

Tax Reform for Acceleration & Inclusion is the first package of the comprehensive tax
reform program of CTRP envisioned by President Duterte’s administration. Its main goal is to
create a more just, simpler, fairer and more effective system of tax collection. TRAIN overhauls
the outdated National Internal Revenue code. As a student, I noticed that there are a lot of news
reports on the changes. But actually, there are much more significant changes under the TRAIN
Law which are not being reported. New laws require rules and regulations on how these changes
will be applied. Revenue Memorandum Circular (RMC) No. 105-2017 was issued on Dec. 29,
2017. It prescribed the revised table for the withholding tax on compensation income. Since then,
the Bureau of Internal Revenue has released various regulations, circulars and orders to implement
the first package of the government’s Comprehensive Tax Reform Program.

The first, and perhaps the most important part of the tax reform, is the lowering of the
personal income tax. Subsequent regulations also clarified certain portions of the personal income
tax, specifically the optional 8 percent rate. Under TRAIN Law, self-employed and professionals
were allowed to avail themselves of the optional 8 percent tax in lieu of the graduated personal
income tax and percentage tax. The TRAIN Law also stated that it will be available to those whose
gross sales do not exceed the VAT threshold. Revenue Regulations (RR) No. 8-2018 clarified that
VAT-registered taxpayers would not be able to avail themselves of the 8 percent rate, regardless
of their gross sales. The regulation also clarified that electing the 8 percent rate should be
irrevocable for the duration of the year.
TRAIN relatively decreases the tax on personal income, estate, and donation. However, it
also increases the tax on certain passive incomes, documents (documentary stamp tax) as well as
excise tax on petroleum products, minerals, automobiles, and cigarettes. The TRAIN law also
imposes new taxes in the form of excise tax on sweetened beverages and non-essential services
(invasive cosmetic procedures) and removes the tax exemption of Lotto and other PCSO winnings
amounting to more than P10,000. Nonetheless, the new law also contains praiseworthy provisions
which aim to simplify tax compliance. Another innovation under Train is the option of self-
employed individuals and/or professionals whose gross sales or receipts do not exceed P3,000,000
to avail of an 8% tax on gross sales or gross receipts in excess of P250,000, in lieu of the graduated
income tax rates. It is not being highlighted, however, that some items that were previously
deducted to arrive at taxable income had been removed under Train. These are the personal
exemption of P50,000, additional exemption of P25,000 per dependent child, and the premium for
health and hospitalization insurance of P2,400 per year. The estate tax rate was also changed from
5% to 32% of the net estate to a flat rate of 6%. The donor’s tax rate was also amended to a single
rate of 6% regardless of the relationship between the donor and the donee. In the old law, the rates
of donor’s tax were 2% to 15% if the donor and donee are related, and 30% if otherwise. However,
the donation of real property is now subject to Documentary Stamp Tax of P15 for every P1,000.

I gained a lot of insights about the TRAIN law. Some of it are; that TRAIN law is truly
comprehensive, and it addresses the serious problems that plague our tax system. Among the
problems: an individual income tax system that is unfair and inequitable, corporate taxation that is
uncompetitive, redundancy of nontransparent fiscal incentives resulting in incalculable revenues
forgone, specific excise taxes that are not adjusted to inflation leading to revenue erosion
(petroleum products), low taxes for goods that impose a higher cost to society than what their
prices show (alcohol, tobacco, unhealthy food), well-intended laws that ironically abet tax evasion
(law on secrecy of bank deposits), and complex rules that enable tax avoidance and make tax
compliance difficult. Also, knowing the law is not the same as knowing how it will be
implemented. Therefore, it is important to know and be educated with the TRAIN law.