It is NOT TRUE that the Philippines’ new Tax Reform (TRAIN) bill is “anti-poor”

Every woman and her dog is saying that the recently-implemented Tax Reform for Acceleration and Inclusion (TRAIN) law is “anti-poor”. They cite how increased taxes on commodities will be an “additional burden” on the poorest Filipinos with increased costs incurred in procuring input into businesses being passed on to customers and “trickling down” to the hapless consumer.

The trouble with the Philippines’ screeching “activists” in the Opposition is that they have focused their whining on a narrow set of effects of tax reform. Changes in prices are always a consequence of any change in any tax regime. But prices are only a small component of a bigger system of variables that contribute to the behaviour of an economy.

An example that everyone can relate with is prices that affect the transport industy. Opposition “activists” complain that increases in fuel prices will “trickle” down to the ordinary jeepney driver (everyone’s favourite “victim”) who, in turn, will pass this on in the form of raised fares to the commuting public who then get slugged with a hit on their disposable income they could, we are told, “ill afford”.

It’s an incomplete cause-and-effect model upon which to build a shrill “activist” cause because it does not take into account other factors, such as the effect of less “millennials” using their daddies’ eight-cylinder SUVs and opting instead to make do with their lowly Honda Civics. Those who don’t have access to daddy-SUVs and already use Civics to make-japorms in Taguig, may even have to start to consider taking public transport (horrors!) as the initial shock of higher fuel prices hit their ability to buy their lattes every morning.

The effect of the price changes on millennials’ japorms budget introduces new variables to the hare-brained fuel price issue “activsts” screech about: (1) reduced demand for fuel could put downward pressure on fuel pump prices, (2) increased demand for public transport could push transport fares upward and (3) less lattes being brewed for millennials translates to less energy consumption and the resulting surplus capacity in the grid could have other flow-on effects.

Millennials also complain about increases in the price of those Vioses and Civics they are frantically saving up to buy (or eyeing as their next vehicle upgrade). But price increases on those commodity vehicles could dampen demand and force dealers to make even more aggressive and sweeter deals to their customers. This would then have the effect of more competitive selling that could turn this market segment into a buyers’ market — good for consumers, in short. And if vehicle sales dip just the same, that will mean more of these millennials jostling with the masses for a jeepney or bus ride on the streets — more business for the hapless bus and jeepney drivers (the so-called “victims” of this tax reform initiative). It could also mean that more buses and jeepneys need to be fielded to serve the increased volume of no-car commuters which, in turn, creates more of that much-needed “employment” the commies keep shrieking about.

The idea that this recent tax reform law is detrimental to “the poor” is just one example of dumb conclusions made using incomplete information. Nobody can claim to be an “expert” on how any new tax measure will ultimately affect the economy or individual peoples’ lives. For that matter, no set of factors that can fit into a single spreadsheet model can predict beyond the next several months how the economy will behave. Millions and millions of variables are at play and those millions each influence millions of other variables. You can’t make pompous claims about who or what will benefit — or suffer — from a “tax reform” initiative on the basis of a small handful of variables cherry-picked on the basis of moronic political agendas.

People should just stop complaining about how “unfair” the world is and just get on with the business of making a living and making serious money out of that living. Filipinos, specifically, should stop worrying about how much money other people are making and, instead, focus on their own bank accounts and paychecks and think of more ways to fatten those.

“Activists” are a stupid enough distraction to the effort of charting one’s own future fortunes and only losers latch on to their “expert” opinion about taxes, the economy, employment, and all the other bullshit slogans they pepper with those words that they use to fill their protest rally paraphernalia. It’s high time Filipinos flick them the bird and get on with the business of real business.

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21 Comments on “It is NOT TRUE that the Philippines’ new Tax Reform (TRAIN) bill is “anti-poor””

  1. It seems like Deja Vu, just like in the US tax cuts, the opposition here explains it’s bad without the proper context, numbers, or even explaining the entire thing other than “It’s anti-poor! believe us!” while playing around numbers and creating “Facts” that support their argument.

    1. “The idea that this recent tax reform law is detrimental to “the poor” is just one example of dumb conclusions made using incomplete information. Nobody can claim to be an “expert” on how any new tax measure will ultimately affect the economy or individual peoples’ lives.”

      That statement is completely false. It is made with the initial premise that the TRAIN is good because, somehow, millenials will have to downgrade their transportation usage and coffee intake. Millenial japorm activities goes down, therefore there should be good effects.

      There are very good and evident historical reasons as to why the effects of government policies are too predictable.

      There are no new variables at all. Seriously, this is what I hate about pinoys who somehow think they had a leveled up mindset on how government policies should be. First worlders already did that before us 3rd worlders. We SIMPLY need to learn from them and their mistakes.

      And yet here we are, those who are are supposed to be “better” does not know any better.

      1. That example on millennials is just one example to illustrate the broader problem of using incomplete models to make conclusions and, worse, politicise those conclusions. Nowhere in the article did I use that one example to conclude anything about the TRAIN itself.

        1. Using incomplete models? You are making the same mistake by mainstream experts on predicting outcomes. And yes, your article did use that example as part of its basis for its conclusion which you have on the title of your post.

          There is no need for complete models to predict government platforms such as tax reforms. All you need is to look at all historical tax reforms made in the past by governments on just about any nation and the results. Then compare those reforms on TRAIN.

          There is simply nothing new under the sun.

  2. benign0. the poor are indeed going to be burdened by TRAIN. they are no longer paying taxes prior to TRAIN. now, with TRAIN, prices of commodities will go up since all tax expenses incurred by businesses are going to be passed to the consumers. Think of what happened to prices when VAT and eVAT were implemented.

    1. “they are no longer paying taxes prior to TRAIN. ”

      Seems to me the ones who should be screeching how unfair the world is are the ones being taxed.

    2. @Toby: the fact that you’ve got a -4 approval rating suggests that you’re absolutely right.

      @benign0: This is one of your more bizarre articles. Why do you assume that, just because YOU can’t figure out what effect TRAIN might have, nobody else can? It’s true that humans overestimate their ability to predict the future, but if everything is as unknowable as you suggest, why would we ever do anything? What you basically said was: bahala na,

      As Toby pointed out, to predict the effect of any particular tax reform, just examine what happened to countries who have been there, and done that. Yes, there are many different variables, but it HAS all been done before, and the effect of this one is incredibly easy to predict. Ever country on the planet has discovered by trial-and-error that you can maximize the tax take (and perceived fairness) by doing two things:

      1) Broaden the tax base. A narrow tax (taxing only the people who aren’t useless) discourages people from starting businesses and creating employment. “The Poor” don’t pay taxes already – so what’s TRAIN even going to change?
      2) Make everybody richer so they can all pay more tax without starting a revolt.

      The reason TRAIN is anti-poor is simple: poor people are poor by choice. In this country, it is better to not engage with the mainstream economy, because it exposes you to a huge world of pain for no gain. Mayor’s permits, BIR, BOC, SSS, PhilHealth … the list of people with their hands held out for donations is endless. The paperwork is ludicrous – reams of duplicated and pointless information, all written out longhand; computers are used only to make things more complicated and incomprehensible. It would be funny if it weren’t so serious.

      Fiddling with tax rates is something first-world countries do. They do it because all the simple things were done 100 years ago, and there’s not much left to fiddle with. This country needs to fix the basics: first fire 90% of the civil servants pushing paper around and causing mischief for businesspeople, then charge the remaining 10% with doing it properly.

      Here’s my suggestion: delete VAT, municipal taxes, Philhealth and SSS – they cost more to implement than they bring in revenue. Create a single flat tax rate for everyone, paid once a year, and distribute some fraction of it to SSS/Philhealth/local services. Simple, understandable, costs next-to-nothing to implement, reduces leakage and theft. Of course, nobody wants to reduce leakage and theft, so nothing will get fixed, and TRAIN will be just another futile piece of verbiage.

      1. @marius: From your comment, it is evident that there are three points I made in the article that you missed:

        (1) the amount of screeching is not commensurate with the amount of knowing. Predicting how the economy behaves is more a computational challenge because it takes more computing power to apply bigger analysis models; therefore,

        (2) the “trickle down” effect being used as basis for the outrage being incited by the Opposition using simplistic cause-and-effect sloganeering is invalid because the sheer number of variables involved; and so,

        (3) the effect of the TRAIN on prices of commodities is not a sound basis for saying the TRAIN is “anti-poor”.

        It seems you did not read the article and based the comment you made above entirely on just the title of the article.

        1. 1) Incorrect. The effect of TRAIN on the poor is not the same as the effect of TRAIN in the Philippine economy.

          2) The trickle down effect of increasing the price of fuel. lets completely state that one out. are you really suggesting that the cause-effect of increasing fuel prices is SIMPLISTIC?

          3) Incorrect again. Since the non-income tax paying Filipinos do not get any direct benefits from TRAIN, they are therefore going to be hit by the price increase initiated by it. They do not gain purchasing power, instead they lose it significantly. Therefore it is going to negatively affect the poor(which should be obvious).

          So, since you are claiming the opposite of what the critics are saying, if you have something better than the “millenial japorms” analysis, we are all ears. Until then, you are just doing the exact same thing the people you are criticizing are doing.

        2. @Toby. Nope. your “incorrect” assertions are incorrect. I did not claim that there was an apples-to-apples comparison between the effects of the TRAIN on the economy and on the poor. And, again, you missed the point of the article. You are making the same mistake the shills are making by using an incomplete model to assert that there is a direct and lasting cause-and-effect relationship between changes in prices and the long-term wellbeing of “the poor”. The effects are short-term which the shills are using for their outrage fad mongering. But looking at the bigger picture and over the longer-term (i.e. extending the model), there are other variables in play that will reduce the soundness of said model that is used for fear-mongering. The laziness that is evident in the quickness to apply this little incomplete model is accounted for by the propter hoc political agenda of these shills.

          I am not claiming the “opposite” of these shills, only that their logic is unsound and therefore not true.

          Read to understand. Do not read merely to debunk.

        3. @benig0, No, I am not making the same mistakes as shills nor am I misunderstanding your article. You are the one that needs to understand MY POINT and reread your own assertions.

          And you are the one who started going to “predicting the effects on the economy” when it all started from predicting the effects of TRAIN on the poor. You can’t weasel your way out of this.

          As you have shown several times already, YOU MADE YOUR OWN CONCLUSION, proven by your assertion that effects(on the poor) are short-term and your version of the bigger picture.

          So stop claiming the your are not “claiming opposite of this shills”. That is a lie, proven by this “It is NOT TRUE that the Philippines’ new Tax Reform (TRAIN) bill is “anti-poor””.

          The “shills” claim its anti-poor. YOU ARE claiming that this is NOT TRUE.

          You made the assertion. So stop claiming you did not. Or do you not even understand your own words?

          It may be fear-mongering. But you CANNOT intellectually claim that the logic IS unsound. Prices of all things in the Philippines will go up but no PP increase are given to the Filipinos who do not pay income tax. Hence why TRAIN is a negative reform for the poor. You are claiming that the effects are short term. You are so sure that decreasing the poor’s PP(purchasing power) now will have no long term effects? You will need to explain that one further(but I will not expect much since you STILL need a complete model).

          It is evident now that you hastily made your post, making the same mistakes as those whom you call “shills”.

        4. @Toby: I’m not “weaseling” my way out of anything.

          Here are my assertions again:

          (1) the amount of screeching is not commensurate with the amount of knowing. Predicting how the economy behaves is more a computational challenge because it takes more computing power to apply bigger analysis models; therefore,

          (2) the “trickle down” effect being used as basis for the outrage being incited by the Opposition using simplistic cause-and-effect sloganeering is invalid because the sheer number of variables involved; and so,

          (3) the effect of the TRAIN on prices of commodities is not a sound basis for saying the TRAIN is “anti-poor”.

          It is, indeed, not true — because the effects on the wellbeing of the poor beyond the immediate short-term effects of the changes in prices following the implementation of TRAIN have not been taken into account by the shills in the fear-mongering they are so far mounting. In fact you handily summarised the flawed reasoning of these shills here:

          Prices of all things in the Philippines will go up but no PP increase are given to the Filipinos who do not pay income tax. Hence why TRAIN is a negative reform for the poor.

          Your assertion that “TRAIN is a negative reform for the poor” was made only within that short-term analysis horizon and the small set of variables to do with the price changes of a handful of commodities (to unsoundly conclude that “prices of all things in the Philippines will go up”). No sound reasoning anywhere there indeed.

        5. @benign0
          “In fact you handily summarised the flawed reasoning of these shills here”

          No, I did not. You are showing your ignorance here. Any significant financial effect now to the poor has long term repercussions. Claiming it is just short-term shows shortsightedness. These group will have to buy lesser things and services now than last year. And prices will increase again next year and still 0 PP increase for the same group again. So another decrease in the amount of goods and service these group can buy. The domino effect on all the things the poor need to buy to go on with their daily lives is extremely large. And you say that the effect is just short-term. That is nothing but ludicrous assertion with no basis whatsoever.

  3. Prices of commodities are subject to the : Law of Supply and Demand. The poor will always be with us, because, there are people who have the drive and ability to succeed; and there are people who are content with what they are , in life. These inert people, multiply like rabbits, inspite of the fact, that they cannot give basic necessities to their children.

    Anyway, it is the role of the churches, to take care of these poor. The churches, also do not want birth control to be implemented. To spoil the poor of freebees, just encourage them not to struggle, to better their lives. They will be content , with their poverty; since everything in law favors them. You don’t have to sweat for a living.

    Implement the Tax Reform (TRAIN), if it helps the country !

    1. The ratio of winners to losers seems to have remained consistent throughout history. That’s just the way things are.

      The only sustainable way to effect “social justice” is to ensure a governance framework where skill, talent, and hard work are rewarded whilst laziness, stupidity, and dishonesty are punished.

      1. That’s the masterful way of putting what real social justice is.

        A tax scheme’s effect is best judged pro- or anti-something after some time, when the studies have finished assessing it. “Anti-poor” at this point sounds only like some emotionalistic propaganda against Duterte’s administration that only serves to alert its supporters to defend it even more vehemently.

    2. Thanks Chino. Or a simplistic way. It’s not always that simple, to be fair, but going back to the basic always helps when there is a need to reevaluate one’s current trajectory. We can tell that Philippine society is lost because of this convoluted debate around morality and ethics that had become hopelessly politicised.

  4. To me its anti poor due to the fact that the oil and coal will be affected which uses for transportation for goods and coal for energy.

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