Congress approved House Bill 5636, also known as the Tax Reform for Acceleration and Inclusion (TRAIN) on second and third reading with 246 votes in favor, 9 against and one abstention. The tax reform package with President Rodrigo Duterte's certification of urgency was passed before the lower house adjourned its first regular session on Wednesday, May 31, 2017.
While the main objective of the TRAIN bill is to lower personal income tax rates, it will broaden tax base and compensate government’s revenue collection through consumption taxes such as Value Added Tax (VAT) and excise taxes on fuel and automobiles. Individuals earning up to PHP 250,000 will no longer be imposed an income tax. This earning over the said amount will be paying incremental rates according to their respective income brackets.
The bill will impose the following excise taxes on diesel fuel, liquefied petroleum gas and bunker fuel from its current rate of ZERO to PHP 3 per liter in 2018; PHP 5 in 2019 and PHP 6 in 2020.
Gasoline (regular, unleaded and leaded) fuel will carry an additional excise tax from its current rate of PHP 4.35 per liter to PHP 7 per liter in 2018, PHP 9 in 2019 and PHP 10 in 2020.
Lubricants, greases, processed gas, waxes and petrolatum, aviation jet fuel, and alcohol fuel will likewise be taxed more under the new approved house bill.
In a country where transportation of goods and services are done mostly by road, the new measures are expected to increase logistics costs, which are expected to be passed on to consumers as well.
A positive change of House Bill 5636 from the previously proposed House Bill 4774 is that the provision for an additional 4% increase in excise taxes annually from the third year onwards has been removed.
Before you go into severe panic mode, take note that despite the president's certification of urgency, the senate has to pass their version of the tax reform bill and both houses need to convene before it gets passes into law.
Currently, the upper house's version of TRAIN or Senate Bill 1408 by Senator Aquilino 'Koko' Pimentel III filed on March 22, 2017, aims to impose similar rates to that of House Bill 5636. However, SB1408 still contains the 4% per annum increase after the three year period, which remains to be deliberated on by senators.
However, Senator Sonny Angara has expressed concern over the proposed increase in excise taxes on fuels as this is expected to have tremendous effects on the marginalized sector. He echos similar concerns as the DSWD (Department of Social Welfare and Development) warned that poorer sectors will be affected by the new proposed excise taxes.
"That's why we intend to have a lot of hearings. But for the finished product, I think, we need to be sensitive towards the marginalized sectors," said Angara.
Senator Angara shared that the upper house is studying a possible phased increase on diesel fuel as a sudden 3 peso increase might be too abrupt.
"I think we can come up with a measure in the next few months. It's just that it may not be exactly what is being pushed by the Executive," concluded Angara.