TRAIN | Tax Reform for Acceleration and Inclusion

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What is the Tax Reform Program?

The Tax Reform for Acceleration and Inclusion (TRAIN) is the first package of the comprehensive tax reform program (CTRP) envisioned by President Duterte’s administration, which seeks to to correct a number of deficiencies in the tax system to make it simpler, fairer, and more efficient. It also includes mitigating measures that are designed to redistribute some of the gains to the poor.

Through TRAIN, every Filipino contributes in funding more infrastructure and social services to eradicate extreme poverty and reduce inequality towards prosperity for all. TRAIN addresses several weaknesses of the current tax system by lowering and simplifying personal income taxes, simplifying estate and donor’s taxes, expanding the value-added tax (VAT) base, adjusting oil and automobile excise taxes, and introducing excise tax on sugar-sweetened beverages.

"The goal of the first package of the Comprehensive Tax Reform Program (CTRP) or TRAIN is to create a simpler, fair, and more efficient system, as per the constitution, where the rich will have a bigger contribution and the poor will benefit more from the government’s programs and services." 

•  Lowering Personal Income Tax (PIT)
•  Simplifying the Estate and Donor's Tax
•  Expanding the Value-Added Tax (VAT)
•  Increasing the Fuel Exercise Tax
•  Increasing the Exercise Tax of Automobiles
•  Increasing the Tax of Sugar-Sweetened Beverages

Increasing the Tax of Sugar-Sweetened Beverages

http://www.dof.gov.ph

The SSB excise tax is proposed to promote a healthier Philippines. Along with the Department of Health (DOH), DOF supports this proposal as part of a comprehensive health measure aimed to curb the consumption of SSBs and address the worsening number of diabetes and obesity cases in the country, while raising revenue for complementary health programs that address these problems. This is a measure that is meant to encourage consumption of healthier products, to raise public awareness of the harms of SSBs, and to help incentivize the industry to develop healthier products and complements. The revenues to be raised from the SSB excise tax will be used solely for education and health to promote the welfare of the people.

The main rationale for taxing SSBs is the following:

• Most of the sugar-sweetened beverage, with some notable exceptions provide unnecessary or empty calories with little or no nutrition. SSBs are not a substitute for healthy foods such as fruits and rice.

• SSBs are relatively affordable especially to children and the poor who are the most vulnerable to its negative effects on health.

• SSB products are easily accessible and can be found in almost any store, unlike other sweetened products. Most often, the poor and the children are not aware of their consequences.

Common examples of SSB products include carbonated beverages, sports and energy drinks, and sweetened juice drinks. TRAIN proposes to tax these products an excise rate of between P5 to P10 per liter depending on the ingredients and amount of sweetener used. The rate will be adjusted based on cumulative inflation.

Consumption of SSBs, mostly soft drinks, is significantly linked to high incidences of overweight, obesity, and diabetes higher worldwide, including in low-and middle-income countries.1 In the Philippines, according to the National Nutrition Survey (2003-2015) there is an increasing trend of overweight or obese Filipinos through the years and across age groups, especially among the poor.

In addition, habitual consumption of SSB is associated with greater incidence of Type 2 diabetes. According to the International Diabetes Foundation, there are around 3.5 million cases of diabetes in the Philippines. In 2015, the government reimbursements on hemodialysis totaled to about P7.4 billion to cover 1.1 million patients. This is considerable high spending for PhilHealth especially on benefit payout for diseases that are preventable with evidence-based and recommended public policy interventions. In total, around P300 billion is spent annually by diabetic patients on maintenance medicine and operations. The government needs sufficient revenues to fund diabetes treatment and inaction will worsen these problems.

The SSB excise tax, as a health measure, will encourage individuals and families to make healthy choices to ensure a healthier and more productive population. To complement the SSB excise tax, there are also non-tax measures organized around the Health in All Policies Approach. This strategy is envisioned to include regulatory measures on marketing, mandatory labeling, information and advocacy measures for health promotion, and improved nutrition literacy among Filipinos.

For more information about the new Philippine Tax Reform  visit http://www.dof.gov.ph/taxreform/index.php/train/