A closer look at TRAIN

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Under the new Tax Reform for Acceleration and Inclusion (TRAIN) Act, or Republic Act 10963, which is being implemented starting 2018, employees who are receiving monthly salaries will start enjoying bigger take-home pay amounts because income-tax rates are lower under the new tax law.

A popular provision under TRAIN is the tax exemption for those who are earning P150,000 annual taxable income (P12,500 monthly). For the rest who will be enjoying higher take-home pay amounts, here is an illustration. Those who are getting P10,000 in salaries a month will stand to gain an additional P620 in take-home pay. Employees
receiving P50,000 monthly will be able to bring home an additional P5,000; those getting P100,000 will have an additional P7,000 to spare; for earners getting P150,000 monthly, an additional P8,200 cash will be added to their take-home pay; and those with salaries of P200,000 will receive P8,463 more, and so on.

Many salaried employees are happy about this development as the extra money may be set aside as savings, invested or used for regular expenses. On the other hand, others believe that the additional money will only be used to cover for the increase in the prices of goods, following increases in the cost of petroleum products. Many argue that informal income earners, older citizens without pension and those self-employed Filipinos who earn very little are going to be on the losing end of the new tax-reform law. They will gain nothing—no increase in take-home pay—yet will have to pay for all the price increases in basic goods.

Take, for instance, the case of a vendor who has a small vegetable stall in the local marketplace. She may already be struggling to pay for her family’s expenses or sending several children through school with her meager income. But since she is not a salaried
employee, the lower tax rates that are in effect now are of no benefit to her. Yet, she will have to stretch her already limited budget to cover for the increases in fuel/petroleum/gas prices and the subsequent rise in basic commodities. This is only one of the economic challenges that regular folks stand to face this year.

The new tax-reform policy has been signed into law and is being implemented at the beginning of this new year. Whether you consider yourself a gainer or loser in the context of TRAIN, the reforms are certainly happening and adjustments will have to be made to maximize the benefits and cut losses, as necessary. Minimize spending on products and services that are more expensive this year, and use any extra income to add to your savings or investment portfolio. Flexibility and resilience will definitely go a long way at this crucial time.



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