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From Where We Sit

The Christmas gift of Train

Anton Ng

There were still some more friends we had to meet up with over the weekend as part of our Christmas activities. My kids continued to receive gifts and they were ecstatic; apparently there is no such thing as gift-opening fatigue.

I was reminded of a child-rearing debate I had with my wife. I’d argued that Christmas gifts should be opened only starting on Christmas Eve, citing the values of patience, delayed gratification, and high emotional intelligence. My wife simply countered that gifts, especially those received during the Christmas season, are as much for the giver as the receiver.

It took a while before I finally relented. I held on as long as I could, not because of a well-established foundation of values but because I just got used to it. That was how I was raised and hence I was skeptical to a new way of opening presents.

That is exactly the same feeling I had when the Duterte administration gifted us with the Tax Reform for Acceleration and Inclusion (Train) law a few days before Christmas. I was skeptical even though I’ve long clamored for tax reforms to address the unfairness of our income tax brackets. I guess I am not alone with this mindset as we often operate with our own biases and reluctance to change.

My first instinct was to reject the entirety of the tax reform and the benefits it could bring (e.g., more equitable income tax brackets and lower estate and donors taxes). But then I listened to people debate it, read articles discussing the upsides and downsides, and scoured the internet for all the relevant information I could find.

Though I was thrilled that income tax brackets were amended (and appear to be more equitable), I was highly suspicious of the impact of the increase in excise tax on fuel. In my mind, higher fuel prices would lead to a corresponding rise in prices of consumer goods, eating up the additional take-home pay of those who will no longer pay personal income tax.

How will this impact those already enjoying income tax exemptions even before the Train? They will not have any bump in cash inflows and yet will also suffer the potential price increases of basic consumer goods.

Excise taxes on fuel have not been adjusted for inflation since 1997. It should also be noted that the excise tax on diesel was even removed during the administration of President Gloria Macapagal-Arroyo. This, at least for me, was good justification for adjusting the fuel excise tax. Another thing that bothered me was whether the increase in the fuel excise tax was regressive in that it would relatively burden the poor more than the rich (something that, based on how luxury vehicles will be taxed under TRAIN, seems to be a reasonable concern).

As a general rule, a fuel tax is a progressive tax policy particularly for low- to average-income countries, according to the book Fuel Taxes and the Poor by Thomas Sterner. Filomeno Sta. Ana of Action for Economic Reforms, meanwhile, notes that the richest 10 percent of Filipino households account for 51 percent of total fuel consumption and 3.7 percent of their consumption spending is for fuel, as compared to only 1.1 percent for the poor. This additional information somehow eased, if not totally removed, any reluctance I earlier had.

There is no denying that the fuel price increase will have an inflationary impact as several investment banks and research groups have forecast inflation to test the upper limit of the 2.0-4.0 percent target for 2018. This will indeed place an additional burden on the poor who will not be getting any additional take-home pay under the income tax adjustments. This will supposedly be addressed by the planned strengthening of unconditional cash transfers to offset price increases coming their way. How effectively this program will be implemented is a totally different matter altogether.

There is a lot to unpack in this tax reform and certainly there are improvements needed. It is not perfect by any means but I believe it is generally a step in the right direction. One thing I learned as I was deep diving into the new tax law is that we should, as concerned citizens, inform and educate ourselves. Be skeptical, yes, but this should always be paired with an open mind, ready to accept new things when given enough reasons and basis.

This is only package one of the comprehensive tax reform program of the current administration. Be ready to continue with more discussions.

Anton Ng is a Partner, Audit & Assurance, of P&A Grant Thornton, one of the leading audit, tax, advisory and outsourcing firms in the Philippines with 21 partners and over 850 staff members. We’d like to hear from you! Tweet @PAGrantThornton, like us on Facebook: P&A Grant Thornton, and email comments to or For more information, visit


As published in The Manila Times, dated 10 January 2018