“A simpler, fairer, and more efficient tax system is needed to promote investment,

create jobs, and reduce poverty. Not reforming the tax system will deprive the poor of

the necessary social services and infrastructure that can lift them out of poverty and

make them more productive contributors to society.” Carlos G. Dominguez,

Secretary of Finance

The Comprehensive Tax Reform Program (CTRP) is needed to accelerate

poverty reduction and to sustainably address inequality, in order to attain the

President’s promise of tunay na pagbabago. By making the tax system simpler, fairer,

and more efficient, additional – and a more sustainable stream of – revenues will be

generated to make meaningful investments in our people and infrastructure, which

will help achieve our vision for the Philippines.

This Tax Reform Program wants to eradicate poverty in the country once and for

all. No tax reform means – a) the poor will likely remain poor, there will be no

significant investments in infrastructure, education and health that will help uplift the

lives of the poor; b) far less budget for infrastructure projects such as badly needed

farm to market roads and irrigation that will surely help our farmers to market their

products directly to the market without any further delay and transportation costs; c)

little improvements in public transportation, more time in traffic, less productive

people, less time for loved ones as urban congestion remains a challenge; d) poor

quality education pervades, classrooms will continue to be cramped and teachers

overworked hampering learning potential, especially that the past administration has

passed the K-12 program and such program needs funding and the government

needing more than 100, 000 classroom to be built and hiring 200,000 new teachers; e)

quality health care escapes the poor in which the poor are likely to get sick and not be

attended well, draining their income and chances of succeeding and this requires more
than 15,000 barangay health centers and over 200,000 new health workers to the

countryside. These are the major problems that the government sees if there’s no tax

reform. Why is there a need for a tax reform? Our old tax code which was the

National Internal Revenue Code of 1997 was inequitable, complex and inefficient. It

has loopholes wherein taxpayers can easily find means to avoid paying taxes or

lowering their taxes. It was inequitable because people are taxed unjustly – even the

minimum wage earners were taxed. Therefore, our government, wanting to solve

these problems, came up with a tax reform – a tax reform that’s all about investing in

our future. We are to take off from the ship that has been rather unstable for many

decades in the past and they would like the tax reform to address poverty once and for

all.

The tax reform program will take on packages. The first package, the Tax

Reform for Acceleration and Inclusion seeks to correct a number of deficiencies in the

tax system to make it simpler, fairer, and more efficient.

Specifically, TRAIN corrects the longstanding inequity of the tax system by

reducing income taxes for 99 percent of income taxpayers, thereby giving them much-

needed relief after 20 years of non-adjustment. It also raises significant revenues to

fund the President’s priority infrastructure programs to reduce poverty incidence from

21.6 percent in 2015 to 14 percent by 2022.

70 percent of the incremental revenues of TRAIN will go to infrastructure and

the Build, Build, Build program, while the balance will go to social services

programs.

In TRAIN, Congress passed two-thirds of the needed revenue for 2018 and is

expected to pass the balance in 2018 to help achieve our revenue and deficit targets.
 The TRAIN did make the tax system simpler but the changes in the tax rates

don’t seem to prove that the tax code became fairer and more efficient. For instance,

the increase in the consumption taxes does not made it seem fair because it has more

effect on the poor although there was the revision in the Minimum Wage Law

wherein the minimum wage earners are not to be taxed anymore so that they may

have higher take home pay but with the changes in the consumption tax, this larger

take home pay is being consumed to buy goods and services. Therefore, the context of

the new tax code being fairer is not justified.

During the campaign period, the then president-candidate Rodrigo Duterte laid

out his plans for the country – war on drugs, infrastructure, the corruptions in the

government, etc. He has great ambitions for the country – fixing the tax system and

the improvements on infrastructure. The current administration wanted to push the

Philippine economy into upper-middle income status by 2022. This implies having

per capita income of at least $4,000. It also means achieving economic growth of 7%

to 8% annually in the medium term. According to an article published by the World

Bank Organization in their website with regards to the updates of Philippine Economy

on October 2019, economic growth slowed in the first half of 2019, driven by a rapid

deceleration in investment growth due to contraction in public spending and weaker

global economy. Nevertheless, the Philippines expect to sustain process in poverty

reduction. Amidst rising global uncertainties, the Philippine economy remains strong

and is projected to grow 5.8% in 2019, before recovery to 6.1% and 6.2% in 2020 and

2021, respectively. In the short term, fast tracking the implementation of recently

approved game-changing reforms would help to achieve inclusive growth, in the long

term, promoting competition to generate quality jobs will enhance the impact of

growth on poverty reduction in the Philippines.

 The goal of having an economic growth of 7% to 8% annually seems to be a long

way still. Having a projected growth of 5.8% in the year 2019 and a recovery of 6.1%

and 6.2% in 2020 and 2021 compared to the administration’s goal of 7% to 8%, the

number doesn’t lie. Achieving this goal and knowing that the term of the Duterte

Administration is nearing its end, it seems that this yet another promise that is made to

be broken.

“Strong, sustainable growth with equity. How do we plan to achieve such lofty

goal? For me the strategy is straightforward. Peace and order is a precondition to

growth. We cannot pursue growth and development if there are shootings in the

streets.

Then we have two major divers of growth: first, the planned upgrading of public

infrastructure, and second, the investment in human capital development.”

Truly, we cannot achieve growth and development if there is no peace and order

in the streets. But before we can plan on improving infrastructures, isn’t it right that

we must first achieve “peace and order?” How we achieve this peace and order and

how to maintain it? Clearly, it seems that the plans took a jump and turned a blind eye

on what is to be done first. They said it themselves, we cannot achieve this plans if

there’s no peace and order.

Upgrading infrastructures – it is true that the country’s infrastructure are out of

dates and improving them is a good step towards development. But then, where will

the money to fund these projects come from? And that’s where the TRAIN comes in

again. The increase or changes in the tax rates under the TRAIN, the revenue that will

be derived from it will fund these projects or as they call it, the “Build, Build, Build.”

Poor infrastructure has hampered the country’s economic competitiveness. The

Philippines consistently ranks the worst in overall infrastructure among the ASEAN-5

countries in the World Economic Forum (WEF) Competitiveness Rankings. Business

owners know too well that poor mobility drives up the cost of doing business. This

drives away investors and dampens economic growth. Looking back in the ‘Build,

Build, Build’ project, out of 75 only 9 started construction or approved. Sure, this

project is ambitious, but will this ‘Build, Build, Build’ project of theirs be another

failure? I mean, let’s face it, the Duterte administration is nearing the end of its terms,

but it seems that there’s not much of their promises materialized.

As a Professor of Economics, Secretary Benjamin Diokno says that we must view

or the appropriate way to look at TRAIN is through its net incidence, which should

answer the question: who bears the tax burden and who benefits from higher

government spending? Well, does TRAIN really corresponds to these question,

because I think its answer is still vague or was the answer already in front of me but I

looked past it? Because this times, I don’t think it answers to it very well, it gave

answers but not fully.

“The reality is that it is not as if the government will collect the taxes and then

lock them up in vault of Treasury. As I have said before, the revenues generated by

the TRAIN will be used to finance the “Build, Build, Build” and our social services

programs. These will evidently benefit the poor the most. After all, it’s the poor who

will benefit the most from an improved public transport system. It’s the poor who

send their children to public schools and it’s the poor who uses the services and

facilities of public hospitals.

In effort, TRAIN takes into consideration the immediate, the medium, and the

long-run effect of the law. Admittedly, it is not a perfect law, but on balance it is a big
plus for the economy.”

Looking at TRAIN through its net incidence and viewing it as a package, is the

same as saying as turning a blind eye during its process, another “the end justifies the

means” project of the government. Through their sugar coated words, it has been

made to believe that this tax reform will uplift the status of our country – it may or

may not though. They said that the poor will be the ones befitted the most but why is

it that the opposite is happening - the poor is suffering day by day and they are, as sad

as it is, becoming poorer. It is not a perfect law, and it may or may not be a big plus

for the economy, but the TRAIN sure has its flaws and its effect and impact on the

people hits them differently and it is clear that the poor have suffered a great impact

on the new tax code. While there are a lot of pros of a no tax reform and cons of a tax

reform, with the current situation of our country and according to some studies and

researches about the tax reform, its implementation may have worsened the plight of

lower-income households.