MATTER FOR

TAX REFORM FOR ACCELERATION AND INCLUSION (HOUSE BILL 5636)

RE: CHANGES

Current tax rules:

Sec. 24 (A) (2) Personal income tax table for both compensation-income earners, and
self-employed and/or professionals
Not over PHP10,000 5%
Over 10,000 but not over 30,000 PHP500 + 10% of the excess over 10,000
Over 30,000 but not over 70,000 2,500 + 15% of the excess over 30,000
Over 70,000 but not over 140,000 8,500 + 20% of the excess over 70,000
Over 140,000 but not over 250,000 22,500 + 25% of the excess over 140,000
Over 250,000 but not over 500,000 50,000 + 30% of the excess over 250,000
Over 500,000 125,000 + 32% of the excess over 500,000

Proposed tax reform:

A. For compensation income earners
Effective 1 January 2018
Not over PHP250,000 (83% of people?)
Over 250,000 but not over 400,000 (8%)
Over 400,000 but not over 800,000 (6%)
Over 800,000 but not over 2,000,000 (2%)
Over 2,000,000 but not over 5,000,000 (1%)
Over 5,000,000 (0.1%)
0%
20% of the excess over 250,000
30,000 + 25% of the excess over 400,000
130,000 + 30% of the excess over 800,000
490,000 + 32% of the excess over 2,000,000
1,450,000 + 35% of the excess over 5,000,000

Effective 1 January 2021

Not over PHP250,000
Over 250,000 but not over 400,000
Over 400,000 but not over 800,000
Over 800,000 but not over 2,000,000
Over 2,000,000 but not over 5,000,000
Over 5,000,000
0%
15% of the excess over 250,000
22,500 + 20% of the excess over 400,000
102,500 + 25% of the excess over 800,000
402,500 + 30% of the excess over 2,000,000
1,302,500 + 35% of the excess over 5,000,000

After 2022, the taxable income levels and base shall be adjusted once every 3 years based on
the rules and regulations issued by the Secretary of Finance.
B. For self-employed and/or professionals
Basis Tax
Gross sales or gross receipts do not exceed value 8% income tax on gross sales or gross receipts in
added tax (VAT) threshold (i.e., PHP3,000,000) excess of PHP250,000 (in lieu of percentage tax)
Gross sales or gross receipts exceed VAT Shall be taxed in the same manner as
threshold corporations as to the applicable tax rate,
minimum income tax and allowable deductions
MATTER FOR
TAX REFORM FOR ACCELERATION AND INCLUSION (HOUSE BILL 5636)

VAT Exceptions:
-lease of residential units
-low-cost and socialized housing
-power transmission
-domestic shipping importation
-boy scouts and girl scouts
-VAT exemptions found in special laws, except those covering senior citizens and people with
disability

Excise tax on automobile:

The excise tax will be dependent on the importers or manufacturers net selling price of the car
and this will therefore increase the final selling prices of automobiles in the country.

Sweetened beverages:

SOURCE: The Philippine Association of Store and Carinderia

Owners (PASCO)

Citing data from market research firm AC Nielsen, PASCO said

80% of the consumers of these products are low-income earners.
These workers, who are earning only minimum wage, are
exempted from tax under the package, but their pay still falls short
of the real living wage.

The Philippine Chamber of Food Manufacturers also cited a 2016

study of the University of Asia and the Pacific, which revealed that
the excise tax will be a burden to sugar and coffee farmers and
sari-sari store owners.

SOURCE: RAPPLER
MATTER FOR
TAX REFORM FOR ACCELERATION AND INCLUSION (HOUSE BILL 5636)

RE: REVENUE

Net gain: 1.16T next 5 years (P133.8B in net revenues Year 1; 200+ succeeding years)
Loss from lowering of personal income tax: P141.4B
Loss from reduction in estate and donors taxes: P3.1B

Gain from expansion of VAT: P81B

Gain from excise tax on oil and vehicles: P73.7B and P14.1B
Gain from excise tax on sugar-sweetened drinks: P47B

*Improved tax administration: P43.8B?

SOURCE: Philippine Daily Inquirer

RE: Situations

SOURCE: Department of Finance

RE: UNDERSPENDING

-Ejercito said why raise 200B when P600B of last years revenue unused. (not sure?)
-Budget Secretary Diokno: In Diokno's report, 302 billion or 13.3 percent of the 2.265-
trillion national budget in 2014 was not spent.

The problem continued in the following years: an underspending of 328 billion or 12.5
percent of the 2.606-trillion national budget in 2015, and 96.3 billion or three percent of the
3.002-trillion national budget of 2016.

"If a government cannot implement a one year plan then it cannot implement a multi-year
plan. Government has an ambitious six-year plan for infrastructure and social sector spending
and to achieve this six-year plan, we must implement a one-year plan first," Diokno added.
MATTER FOR
TAX REFORM FOR ACCELERATION AND INCLUSION (HOUSE BILL 5636)

RE: DAMAGES
Bayan Muna Rep. Carlos Zarate said higher taxes on fuel would be counter-productive as it
would reduce the projected benefits of lower income taxes.

Higher taxes for oil would create a domino effect that would spike the prices of basic goods
and services like water and electricity, Zarate said.

Albay Rep. Edcel Lagman said the DOFs plan will not benefit low-income wage earners who are
already exempted from income taxes.

They will not be spared from cascading burden of the tax relative to VAT and excise taxes on
oil products because at the end of the line are the consumers, the very small wage earners who
are not beneficiaries of the income tax deduction, Lagman said.

With overall prices expected to go up by 1.5%, and transportation costs expected to go up by

4.8% due to the excise tax on fuels, Deputy House Speaker Miro Quimbo also points out that
minimum wage workers, farmers and fisherfolk who do not pay personal income tax will not
benefit from the tax reform program, but will be hit hard by the increased cost of fuel and
other consumer goods.

RE: VOTE
Passed by House of Representative May 31. 246-9-1.

RE: TARGETTED TRANSFERS

Php300 for lower 25th percentile

-social protection program only for a period of three years

- ambiguity in the House bills provisions on the implementation of this social benefits program:
out of the 59-page bill, there is only a third (1/3) of a page on them with just cursory mention of
a social benefits program and granting fuel vouchers to qualified transport franchise
holders.

NOTE: food, drinks, LPG, transport fares, electricity, housing and other basic goods and services they consume
MATTER FOR
TAX REFORM FOR ACCELERATION AND INCLUSION (HOUSE BILL 5636)

-60% of Filipino households, or 13.7 million households with some 60 million Filipinos, will have less money in
their pockets after the tax reform.
1) MAKE POOR POORER
The government will in effect take away:
-Php737 annually from the pockets of the poorest 2.3 million families with an average monthly household
income of just Php5,214 in 2018 (first and lowest income decile)
-Php980 from the next poorest 2.3 million families with monthly income of Php8,315 (second income decile)
-Php1,163 from the next poorest 2.3 million families with monthly income of Php10,691 (third income decile)
-Php1,374 from the next poorest 2.3 million families with monthly income of Php13,015 (fourth income decile)
-Php1,687 from the next poorest 2.3 million families with monthly income of Php15,746 (fifth income decile)
-Php2,088 from the next poorest 2.3 million families with monthly income of Php19,269 (sixth income decile).

The poorest 60 million Filipinos will pay more taxes under the proposed tax package with higher prices on food,
drinks, LPG, transport fares, electricity, housing and other basic goods and services they consume.
-take away Php737 from every rice farmer
-Php980 from every farm worker
-Php1,163 from every construction worker
-Php1,374 from every private school teacher
-Php1,687 from every bookkeeper
-Php2,088 from every machine tool operator.

-EX: the DOF has also estimated that the oil excise tax alone will increase a fishermans fuel expenses by Php1,089
and of a farmers by Php1,210 with the VAT and inflationary impact even coming on top of these.

2) MAKE RICH RICHER

-the highest-earning 40% of Filipino households, or 9.1 million households with some 40 million Filipinos, will
have more money in their pockets after the tax reform.

-2.3 million families with an average monthly household income of Php24,355 (seventh income decile) will gain an
additional Php4,187 annually
-the next 2.3 million families with monthly income of Php32,295 (eighth income decile) will gain an additional
Php8,012
-the next 2.3 million families with monthly income of Php47,131 (ninth income decile) will gain an additional
Php16,954
-and the richest 2.3 million families with monthly income of Php111,380 (tenth and highest income decile) will gain
an additional Php43,540.

They have net gains because their increased take home pay from lower personal income taxes more than offsets
losses from additional VAT, oil taxes, and inflation.

However it does not make sense for supposed tax reforms to give a corporate executive already earning
Php280,309 monthly (or Php3.4 million yearly) an additional Php91,027 or a companys chief executive officer
already earning Php598,132 monthly (or Php7.2 million yearly) an additional Php130,267. Yet the DOFs TRAIN
does just that while, to recall, taking hundreds of pesos away from the poorest Filipinos who already have so little
as it is. The poorest are made to pay more out of much smaller incomes to begin with and this is not by any
reasonable interpretation a fairer and more equitable tax system.