The struggle for a fair tax system hangs in the balance as the public awaits for the TRAIN Package 2 to get signed by his excellency, President Rodrigo Duterte — based on the excerpts of his SONA speech last Monday, July 23, 2018.
July 30, 2018 — It’s been a week since President Rodrigo Duterte delivered his State of the Nation Address, and mentioned during his speech were the plans of the government in bringing a much better tax system to the country — one of which was the implementation of the second package of the TRAIN law (Tax Reform for Acceleration and Inclusion), that was heavily debated not only by the Congress and the Senate but also by tax professionals.
Flickr — Takehiko Nakao
The president urged the Congress to pass TRAIN Package 2 as soon as possible, saying that he wants to sign it before the end of the year.
To sum it all up, we’ve created an article to help you understand the much anticipated TRAIN package and the possible provisions that could come along with it.
Package Two Might Be on Its Way After All
Many senators have deeply expressed their concerns regarding this law, saying that the government needs to learn from the effects that the country is now experiencing after the first package of TRAIN was approved — first in line was the sudden general increase in prices and fall in the purchasing value of money.
Despite the calls of suspending the tax reform law due to inconsistencies, it was President Duterte’s final decision that prevailed. He stated that there is no need to abolish TRAIN since the provisions of this law will be needed for the growth of economy in the Philippines.
Further stressing the decision of the President was a statement by Budget Secretary Benjamin Diokno on Wednesday, stating that TRAIN 2 is indeed happening, despite the resistance from the Senate:
“They are part of the administration, right? And it is their responsibility to respond to the demands of the President,”
He also added:
“The President is very clear. He wants all the tax reform packages passed before the end of the year,”
Generalizing TRAIN’s Package 2
While the first package of TRAIN law focused on lowering personal income taxes of individual(s), the second package of TRAIN will delve closely on the “non-individual” side, as it plans to (1) lower corporate income taxes from the current 30% down to 25% and (2) modernize fiscal incentives in order to attract new industry players in return.
According to a statement by Finance Secretary Carlos Dominguez II, he stated that since the business world is changing due to new developing industries– we, on the other hand, also needs to take that part of change in order to accommodate investors:
“The world is constantly changing and there are plenty of new industries that are developing, such as robotics and data analytic, this will take the place of Artificial Intelligence or Machine Intelligence. These are the kinds of industries that we want to attract because AI technology is poised to take over the lower-end business process outsourcing. So we want to modernize our incentive giving to attract more industries.”
Lowering Corporate Income Tax Rates
One of the main objectives of this 2nd package is to lower corporate income taxes for about 95% of the businesses in the Philippines, especially startups and medium sized businesses.
Setting Criteria On Fiscal Incentives…
In an article by the Department of Finance, Assistant Secretary Paola Alvarez stated that under the implementation of R.A No. 10708 or the Tax Incentives Management and Transparency Act (TIMTA), a rough estimate of P235.3 billion had been granted to PEZA-registered enterprises in 2015, in addition with 13 Investment Promotion Agencies (IPA), for a grand total of P301 billion pesos.
The provisions of the TRAIN 2 proposal is set to modernize the collection of tax rates amongst the businesses in the Philippine economic zone. With this package, companies that do not have fiscal incentives would have to pay lower tax rates while those industries under PEZA need to comply with the criteria below before receiving incentives:
- Target industries
- Performance based
JuanTax Got Your Back
Whether you’re an individual or non-individual taxpayer, JuanTax can help you in simplifying the way you generate and file local taxes!
JuanTax is a Philippine-based cloud tax software which helps businesses in achieving compliance with the Bureau of Internal Revenue (BIR) when it comes to transactional taxes including VAT, Percentage Tax, and Expanded Withholding Tax.
Since JuanTax is TRAIN ready, rest assured that our tax software lets you know of the correct tax forms to file — based on business details and tax type, in line with the provisions of TRAIN law, freeing you from the dilemmas of understanding the laws of TRAIN — Just generate and file your tax returns and that’s it!
Please stay tuned for more updates regarding TRAIN law. In the meantime, you can visit https://juan.tax/ and Sign Up for a free trial. You can also visit our Help Center to learn more on how to do your taxes right using JuanTax!