Senate approves TRAIN, 17-1

November 28, 2017

The Senate approved the Duterte administration's Tax Reform for Acceleration and Inclusion or TRAIN, the first package of the government's comprehensive tax reform program, on third and final reading,  by a vote of 17-1 Tuesday.

Senators who voted for the tax bill were Senate President Aquilino Pimentel III, Senators Ralph Recto, Franklin Drilon, Sonny Angara, Francis Escudero, JV Ejercito, Nancy Binay, Grace Poe, Cynthia Villar,  Loren Legarda, Sherwin Gatchalian, Richard Gordon, Gregorio Honasan, Manny Pacquiao, Joel Villanueva and Juan Miguel Zubiri.

Senator Risa Hontiveros was the lone oppositor.

Among Hontiveros' objections, as she said in her Twitter account, was "if the Senate was not in such a rush to get the TRAIN bill passed, we would all have had enough time to simmer down, compose  ourselves and see the wisdom of the proposal to lower the Value Added Tax from 12 percent to 10 percent and then to subsequently align it with the VAT regimes in the region."

The bill seeks to raise revenues of between P100 billion to P130 billion to finance the infrastructure program of the government.

Drilon, in a statement before the deliberations said the bicameral conference committee will be the "real battleground" for the approval of the tax bill.

"There are numerous disagreeing provisions between the House of Representatives and Senate versions," said Drilon, the Senate minority leader.

Among the contentious provisions of the measure, according to Drilon, are the proposed additional excise taxes on petroleum, minerals, coal, and cosmetic procedures.

Reconciling the very different proposals made by the House and the Senate on sugar and sweetened beverages, automobiles, value-added tax (VAT) zero rating and lifting of VAT exemptions, is also expected to be a very arduous task , said Drilon.

The Senate, in its version, approved excise taxes on petroleum products. For diesel, the Senate proposed to impose an excise taxes of P1.75 per liter of volume capacity starting 2018, P3.75 in 2019, and P6.00 in 2020,  which Drilon said could “burden the poor even more.”

In the Senate version however, the imposition of the petroleum taxes could be suspended depending on certain factors, namely the prices of the Dubai crude oil and the inflation rate vis-à-vis inflation targets set by the Development Budget Coordination Committee and the Bangko Sentral ng Pilipinas.

Compared to the House version, the Senate version introduced lower taxes for sugar sweetened beverages, except those that use high fructose corn syrup, which shall be slapped with higher taxes.

The Senate also approved a 3,000-percent increase in coal taxes, to be implemented in three tranches until 2020 – from the current P10 excise taxes in coal, which will be increased  to P100 in 2018, P200 in 2019, and P300 by 2020.

The chamber also doubled excise taxes on minerals and mineral products and quarry resources aimed towards responsible mining and environmental protection.

Another Senate initiative is the proposed exemption of prescription drugs and medicines from value added tax.

Also expected to be subject of debates are the earmarking provisions of the bill, as well as the exemptions provided to various sectors, among others. The Senate version has approved to earmark 60 percent of the incremental revenues to infrastructure, 13 percent to the military modernization program, and  27 percent to social mitigating measures. DMS