CITY OF SAN FERNANDO– What is the Tax Reform for Acceleration and Inclusion (TRAIN) Law or its provisions?
Most Kapampangans seem at a loss.
A random survey conducted on Tuesday showed that only one or two among several persons asked knew of the TRAIN Law but not its provisions.
This developed despite its implementation which started January 1 with government saying the funds that will be generated from the excise tax will fund the completion of infrastructure projects under its “Build, Build, Build Program,” among them the rebuilding of the Clark International Airport, the New Clark City in Tarlac and the rail connectivity between Clark and Subic.
“Tiyak nang may pagkukuhanan ng mas malaking pondo para sa pagsasakatuparan ng mga nakalinyang malalaking imprastraktura sa Gitnang Luzon (We are now assured of getting much bigger funds for the realization of big infrastructure projects lined up in Central Luzon),” declared Finance Secretary Carlos Dominguez.
The TRAIN Law is meant to overhaul the country’s 20-year-old tax law in a bid to make the tax system fairer and simpler, according to the government.
However, ordinary citizens are confused like Cristy Pasamonte, 61, a manicurist, who was not even aware of the tax reform law or any of its provisions.
Justiniano Balador, 56, food vendor, can’t explain what the TRAIN Law is all about or how will it affect his business.
Florentino Albin, 25, waiter, doesn’t know the meaning of the TRAIN Law but is aware of the price increase and income tax exemption.
Like Pasamonte, Balador and Albin, most of those who were asked are either ignorant or confused on the TRAIN Law.
On December 19, President Duterte signed Republic Act 10963 or the TRAIN Act. Under the TRAIN, personal income tax rates will be adjusted to shift the burden off lower- income segments toward the ultra-rich, according to reports.
The projected revenues to be foregone from lower personal income tax will be off set by higher excise levies on petroleum, coal, mining, tobacco, liquor, sweetened beverages, cosmetic and automobiles.
Under its P8.44-trillion 2017-2022 Build, Build, Build Program, the government aims to jack up its spending on infrastructure alone to P1.899 trillion, equivalent to 7.45 percent of gross domestic product, by the time Duterte ends his term in 2022.
However, the estimated tax take from the new tax law is less than the Department of Finance had hoped to raise with TRAIN expected to generate $1.8 billion in revenues in its first year.
The TRAIN is also seen to slash prices of luxury vehicles while prices of basic utility cars, which salaried workers and middle-level executives buy, are expected to go up.
AER on SRPs
A report made by the economic policy advocacy group Action on Economic Reforms (AER) published on New Year’s Eve in the Philippine Star showed that vehicles with a suggested retail price (SRP) above P2 million would see a reduction in selling prices with the lower tax that the so-called tax reform law imposes on them.
AER projects that “a Ford Mustang 2.3 Eco- Boost Premium, which has a current SRP of P2.509 million, could sell for P2.43 million now, or a price cut of more than P82,000. A Mitsubishi Pajero 3.8L V6, with an SRP of P2.555 million, could sell for P2.46 million nearly P100,000 lower.”
The AER said the simulations showed that the more expensive the luxury vehicles are, the bigger the price reduction.
A Toyota Land Cruiser Prado 4.0, with an SRP of P3.017 million, is projected to sell for P2.77 million, or a discount of nearly P250,000.
A Toyota Alphard 3.5 V6, currently selling for P3.28 million, could sell for P2.94 million or a price cut of P337,000.
Prices are expected to decline because the tax will go down, the AER said. Under the TRAIN law, vehicles with a net manufacturer’s price of up to P600,000 will be taxed at four percent, 10 percent for those with a producer’s price of P600,000 to P1 million, 20 percent for those with a price of P1 million to P4 million, and 50 percent for those with a manufacturer’s price above P4 million.
The present rates are two percent for vehicles with a manufacturer’s price of up to P600,000, P12,000 plus 20 percent of the excess over P600,000 for those with a price of P600,000 to P1.1 million, P112,000 plus 40 percent of the excess over P1.1 million for those with a producer’s price of P1.1 million to P2.1 million, and P512,000 plus 60 percent of the excess over P2.1 million for those with a price above P2.1 million.
The four luxury vehicles cited by AER fall under the third tax tier in the new law and will be levied 20 percent, instead of the current highest rate of P512,000 plus 60 percent of the excess over P2.1 million.
For the poor man’s cars, AER predicts that their selling prices could go up. The basic Toyota Vios 1.3, with a current SRP of P599,000, could see a price hike of nearly P11,000 while a P9,000 increase is projected for the cheapest car in the market, the Mitsubishi Mirage GLX, which is presently selling for P555,000.
A Toyota Fortuner 2.4G, with an SRP of P1.3 million, could sell for P1.505 million, or an increase of P119,000 as compared to prices of luxury vehicles which are now falling.