Enjoying the TRAIN ride

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Florenz C. Tugas

The View From Taft

Enjoying the TRAIN ride

The New Year immediately ushered in the much anticipated and talked about Christmas present of the current administration. On Dec. 19, 2017, President Rodrigo Duterte signed into law Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN), which aims to make the taxation system fairer, simpler, and more efficient. The TRAIN provisions unwrapped in December are just the first installment; more provisions are still in the works.

Although I recognize the extent of debate that this topic has generated, I will focus on two points: the take-home pay and the “Build, Build, Build” program.

Consistent with the basic principles of taxation, the TRAIN intends to strengthen the symbiotic relationship between the taxpayers and government as it benefits both parties. Having higher take-home pay among individual earners and generating higher revenues to harness human capital are the benefits most cited by advocates of the TRAIN. Ironically, these same benefits are highly criticized by the naysayers of the TRAIN.

For individual earners, receiving higher take-home pay means having higher disposable income, resulting in being able to buy more than the usual, all things remaining equal. In addition, within a relevant range, the additional disposable income resulting from tax savings is higher for those who earn more.

Although this is conceptually true, cynics are concerned about the “all things remaining equal” phrase. They argue that the new law taxes consumption, which means that the more you consume, the more taxes you pay. This defeats the very purpose of increasing the take-home pay. In this case, their disposable income effectively shrinks, resulting in their being able to buy less than usual.


Advocates of the TRAIN counter that not all products will have higher prices. The TRAIN would affect mostly soft drinks and fuel products. The debate would have been won at soft drinks, which are unhealthy drinks. But fuel price increases result in higher prices of basic commodities. To this, the Department of Trade and Industry has assured the public that it will monitor manufacturers and stores, which may resort to profiteering.

For government, generating higher revenues means having more funds that can be used to improve or construct infrastructure and render quality education, health services, and social protection, among others. These improvements will clearly manifest the “change” that was promised from the onset of the Duterte administration.

A concern though among critics of this argument is on how government will generate additional revenue given that the TRAIN is expected to reduce taxes collected from businesses and individuals. Citing their earlier argument regarding taxation on consumption, they suspect that the decline in tax collection will be compensated for largely by taxes on consumption, which will burden ordinary citizens. To counter this argument, government is encouraging its citizens to start businesses and create jobs by incentivizing them with lower income and business taxes.


Indeed, a better tax system is easier envisioned than done. But we have to start somewhere.

Individual earners have to realize that the TRAIN offers them higher take-home pay to manage. The operative word is “manage.” Living within one’s means is still key to a decent life. The disposable income has to be spent well. For instance, reducing one’s intake of soft drinks has health benefits. Moreover, moving from an employee mind-set to a business mind-set might just be the paradigm shift to improve one’s life. I want to believe that Filipinos can be entrepreneurial.

To compliment these changes, government has to review the cost of doing business in the Philippines. It can bring down or subsidize costs. It also has to improve the transportation and communication systems. One of the characteristics of a developed country is when the rich use public transportation. This will not only improve traffic flow but also increase productivity as time wasted in traffic will be reduced.

Aside from this, people have to experience quality service from government. For this to happen, more effective mechanisms to supervise and monitor performance have to be institutionalized.

Finally, although the TRAIN aims to correct our tax system’s inequity, which I believe is long overdue, achieving this will not happen overnight or even in a year. The reform entails not only a bold move from government but also an educated response from its citizens. This move and response should be anchored on continuous and patient consultations among the different stakeholders.

For now, let us hope, watch, and act.

As the implementation of the law is still a work in progress, we just need to move on, keep going, and enjoy the TRAIN ride.


Dr. Florenz C. Tugas is a full-time faculty member of the Accountancy Department of the Ramon V. Del Rosario College of Business of De La Salle University. He specializes in Basic Accounting, Auditing and Assurance, and Management of Information Technology courses.