TRAIN — TRAIN go away?

Many Filipinos, private citizens with tax arrears and estates to settle as well as foreign investors are all waiting at their respective “stations in life” waiting for TRAIN 2 to arrive. The problem is that we are not even sure if there really is a TRAIN 2 in place and what sort of train, TRAIN 2 will be. Many private individuals are actually convinced that TRAIN 2 will give them a break in the form of a tax amnesty for their arrears with the BIR specifically in the settlement of family estates and inheritances. Some think that the amnesty will be retrospective so that those who could not afford to pay or did not have cash on hand to settle estates can finally afford the “6%” instead of the 32% plus – plus, or penalties etc. 

One congressman who claims he had a hand in the crafting of TRAIN 2 told me that there would be no new taxes in TRAIN 2. That’s the good news. The Bad News is that TRAIN 2 will be all about rationalizing incentives given to various businesses, industries, associations and organizations which I suspect may even include rationalizing tax free privileges given to churches and educational institutions. Rationalizing in this case means reducing if not removing tax-free benefits or exemptions altogether. In effect TRAIN 2 will end up being a play of words and concept. As the former US President George W. Bush once said: “Read my lips: No New Taxes.” To that, Finance Secretary Sonny Dominguez and President Rodrigo Duterte will add: No New Taxes – Just less tax breaks and incentives.

This is the reason why the TRAIN 2 is considered a mixed bag. For many citizens, there is hope in terms of amnesty. But for corporations and “private institutions” TRAIN 2 will effectively be equivalent to “TAXES ON THE PRIVILIGED  & PREVIOUSLY EXEMPTED.” If my suspicion about the lifting of tax exemptions on churches and schools is right, then that might partly explain why President Rodrigo Duterte spent several weeks fighting or hitting at the Catholic Church and priests. The President has done the same with several companies that the President verbally punched silly until they settled hundreds of millions in fees or tax liabilities. Objectively speaking, I can respect tax levied on the “businesses” of churches such as schools, hospitals, and commercial real estate, but not on the tithes and contributions made or given by church members as support, maintenance and propagation of the faith.

Without a doubt, the possible launch of TRAIN 2 less than a year from the next elections could be a blessing if the administration invests in promoting how  beneficial it is for ordinary citizens with tax arrears to settle and why rationalization is an equalizer and an instrument of social justice. If however, the proponents of TRAIN 2 carelessly launch it without the substantial public information campaign required, then the Duterte Administration and the DOF will end up impaling themselves on what should have been a very powerful sword.

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After putting their names on TRAIN 1 or the Tax Reform and Inclusion Act, we now find most if not all legislators especially Senators afraid to author or sponsor the follow up law or TRAIN 2. The situation is reminiscent of the Value Added Tax law or VAT and its expanded version called EVAT. Legislators were, and still are eager to please a President or the new administration by passing income generating measures because at the starting line, the new administration does enjoy high popularity ratings and public support. So any legislator or political party who sign on such measures don’t get burned.

But once the new law is in place and citizens are taxed or burdened out of pocket, anyone crazy enough to step up and sponsor a follow up law runs the risk of losing in the upcoming elections. Senator Ralph Recto paid dearly for the VAT law and his experience has been the textbook case on why you should not sponsor or author a follow up measure such as TRAIN 2. The problem is, TRAIN 2 is a mixed bag of good and bad assuming “rumors” and unconfirmed reports are true. No one I know has actually seen or read a draft or proposed version of TRAIN 2. Ideally, proponents should be handing out drafts of proposed bills but under the current Congress and Senate, it seems that you only get information on a need to know basis. When people were deliberating and debating about the Bangsamoro Organic Law and the proposed draft constitution for Federalism, a couple of congressmen, media and academe claimed that no one had ever seen or read an “official” or verifiable copy! When the BOL was about to be passed by Congress as a whole, news anchors covering the event were “shocked” to hear that copies of the law would only be seen by several representatives that day and not before hand!

Like I pointed out earlier, TRAIN 2 will only be as good as the presentation and argument that backs it up. The reason Senators are scared shitless to sponsor it is because they can only think as far as today’s inflation is concerned. No one has shown them the statistics on how many families, estates and the likes remain in limbo unable to pay taxes and compounding interests and penalties. Bailing out those families and helping them to move on financially will certainly get votes. As far as corporations and institutions go, they will all howl UNFAIR and threaten to leave, but they won’t! Why? Because if you read their annual reports and study their year end profits they are making way too much money. They’re just pissed off that they’ll be making a few million pesos less and their shareholders won’t be as impressed with them at the end of the year. In a country where corporations make customers pay for the company’s Income Tax,  I say it’s time to get rational and wake from that insanity!

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