EXPLAINER: Why the government is pushing for 2nd TRAIN package

MANILA, Philippines– President Rodrigo Duterte's economic team is pushing hard for the approval of the 2nd tranche of the Tax Reform for Acceleration and Inclusion (TRAIN) law amid strong opposition.

The Department of Finance (DOF) is proposing to cut corporate income tax and modernize fiscal incentives. These reforms, said economic managers, are necessary.

But the 2nd TRAIN package has very few champions and many opponents.

While the deliberations at the House of Representatives are moving, the Senate is wary. Senate President Vicente Sotto III said his colleagues fear the proposal would bring another wave of inflation.

Two of the country's top promotion investment agencies have spoken out against the measure as well. Several businesses have raised concerns, too.

Corporate income tax

The Philippines has the highest corporate income tax (CIT) in Southeast Asia at 30%. Neighboring Indonesia and Malaysia have 25% and 24%, respectively. Singapore has the lowest CIT in the region at 17%.

Graph from the Department of Finance

The goal is to reduce the CIT rate from 30% to 25% by 2022.

This is perhaps the least contentious feature of the 2nd TRAIN package.

At least 6 big businesses and civil society organizations have expressed their support for the proposed reforms, according to the DOF. 

The Management Association of the Philippines (MAP), in a letter to Finance Secretary Carlos Dominguez III, said, "We agree with the need to rationalize and modernize the tax incentive system to make incentives time-bound, performance-based, and not excessively complex with far too many different, even overlapping laws, rules, and regulations."

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.

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