Rich to get richer under TRAIN law, research group says

Economic think tank IBON said the rich and other higher income groups will have larger take home pay than previously estimated under the Rodrigo Duterte government’s new tax law.

While the poor will still bear the brunt of paying higher taxes from the Tax Reform for Acceleration and Inclusion (TRAIN) Law, IBON said that the highest earning 40 percent or about 9.1 million households will have even more money in their pockets compared to the original Department of Finance (DOF) proposal.

IBON’s computations based on the latest December 2017 DOF data shows that the richest 10 percent — estimated by the DOF to be earning an average of Php104,170 monthly – will have an additional Php90,793 annually starting this year.

From July 2017 DOF data on the first year impact of TRAIN, IBON previously estimated the richest 10 percent earning an average of Php115,428 monthly will have an additional Php33,795 annually.

For example, a corporate chief executive officer (CEO) who belongs to the top 0.1 percent of families already earning Php494,471 monthly will take home an extra Php88,568 annually, IBON said.

This is a reversal of the previous estimate that a CEO among the top 0.1 percent earning Php706,017 would lose Php20,694, said the group.

Middle income and lower-middle families meanwhile take home an additional Php7,880 to Php24,343 under TRAIN.

IBON said that the poorest 60 percent of Filipino or 13.7 million households will continue to have less money under the new tax law, though figures based on the more recent data are slightly lower than previously estimated.

Under TRAIN in 2018, IBON said the following sample sectors are expected to lose more:

  • rice farmers (first and lowest income decile) will lose Php646 annually;
  • farm workers (second income decile) will lose Php937;
  • construction workers (third income decile) will lose Php1,141;
  • private school teachers (fourth income decile) will lose Php1,363;
  • bookkeepers (fifth income decile) will lose Php1,591; and
  • machine tool operator (sixth income decile) will lose Php1,887.

IBON said that contrary to government claims, majority of Filipinos will not benefit from income tax exemptions from TRAIN while about 15.2 million families who already do not pay income tax because they are minimum wage earners or informal sector workers with erratic incomes will not have any income tax gains.

While not getting increased take home pay, the majority will have to endure price hikes as a direct or indirect effect of higher consumption taxes.

200 pesos monthly for poorest families

In response to TRAIN critics, the Department of Budget and Management (DBM) announced Wednesday a new assistance package for around 10 million households who will receive P200 per month to help them coped with the impacts of the new taxes.

In his first news briefing in 2018, Budget Secretary Benjamin Diokno said that the government has earmarked P28.8 billion in the 2018 national budget to offset TRAIN Law’s impact.

“This is in response to critics who say that Train is anti-poor because the informal sector and already tax-exempt wage earners will be faced with higher excise taxes,” Diokno said.

IBON however dismissed Diokno’s announcement as too little as well as an admission of guilt.

“The proposed cash transfers to supposedly minimize the tax impact on poor households are an admission by the DOF that the poor will be burdened with higher spending,” IBON in a statement said.

“[T]hese are only temporary and will only be given during the first three years while oil excise taxes continue to increase,” IBON said.

“The poor will no longer receive the temporary cash transfers after 2020 yet have the permanent burden of higher prices on their basic goods and services,” the group added

IBON said that the TRAIN Law shows the Duterte government’s “tendency towards anti-poor and pro-rich policies.” # (Raymund B. Villanueva)