The document discusses several key points regarding TRAIN 1 and the need for TRAIN 2 reforms: 1) TRAIN 1 introduced distortions like high personal income tax rates of 30-35% and corporate income tax rates that are among the highest in Asia. 2) Many countries are trending towards lower personal income tax rates to provide higher take-home pay and boost domestic consumption. 3) The Philippines already has high taxes in other areas like the highest VAT in ASEAN and among the highest dividend and interest withholding taxes. 4) A federalist system could reduce national taxes and assign more revenue raising powers to state/regional governments to fund local infrastructure projects through their own tax systems.

1. DeLoitte TRAIN forum
Ascott BGC, Taguig City
February 15, 2018
TRAIN 1’s distortions should be
corrected by TRAIN 2
Bienvenido S. Oplas, Jr.
President, Minimal Government Thinkers*
Columnist, BusinessWorld, “My Cup of Liberty”
Fellow, Stratbase-ADRi
minimalgovernment@gmail.com
* MGT is a member-institute of PRA and EFN Asia

2. Country Ave. pay
per year, $
No. of tax
brackets
Top PIT
rate
Applies at est.
income/year
Singapore 55,041 11 22% $240,000
Brunei 38,538 0 0
Malaysia 10,538 11 28% $240,000
Thailand 5,778 8 35% $120,000
Indonesia 3,475 4 30% $ 40,000
Philippines 2,765 7 32% $ 10,000
PH-TRAIN* 6 35% $160,000
Vietnam 1,910 7 35% $ 40,000
Laos 1,660 7 24% $ 5,000
Myanmar 1,200 6 25% $ 27,000
Cambodia 1,006 5 20% $ 3,000
Top personal income tax (PIT)
rates in the ASEAN, 2016
Source: ASEAN Briefing, February 2017,
http://www.aseanbriefing.com/news/2017/02/28/personal-income-tax-asean.html
* PH-TRAIN not included there, added only in this table. P8 M at P50/$ is equivalent to $160,000.
* Good news: overall
PIT rates have
declined.
* Bad news: high
rates of 30% and
32% were retained,
an even higher rate
of 35% was
introduced for
incomes P8 M/year
or higher.
The table was shown in my column last
July. This quote is from Ronald Reagan

3. * Lower personal
income tax (PIT) is
equiv. to de facto pay
hike, means more take
home pay, more
domestic consumption
which are captured by
consumption-based
taxes.
* Lower PIT is the
trend, there is tax
competition worldwide.
Decline in PIT from
socialistic rates to
current levels.
Source: Fraser
Institute, Economic
Freedom of the World
(EFW) 2017 Report
Country/ Economy Top marginal income tax rate, %
1980 1990 2000 2010 2015
1. Brunei 0 0
2. Singapore 55 33 28 20 20
3. Cambodia 20 20
4. Laos 24
5. Myanmar 40 40 25
6. Malaysia 60 45 29 26 25
7. Indonesia 50 35 35 30 30
8. Philippines 70 35 32 32 32
9. Thailand 60 55 37 37 35
10. Vietnam 40 (‘05) 36 35
Hong Kong 15 25 17 17 17
New Zealand 61.5 33 39 36 33
India 60 53 30 31 35
S. Korea 89 64 44 39 42
Taiwan 60 50 40 40 45
China 45 45 45 45 45
Australia 62 49 47 45 47
Japan 75 65 50 50 56
http://bworld
online.com/gl
obal-vs-
national-tax-
reforms/

4. .
* Zero income tax is done in 10 countries
and jurisdictions. 8 here + Bermuda &
Cayman islands.
* Zero income tax countries on ave. are
richer, have higher scores and ranks in
WEF-Institutions, than most countries that
impose income tax.
* Same pattern on WEF-Institutions is
observed for developed Asia except S.
Korea.
* ASEAN 5 have lower ave. income, lower
scores and global ranking, except
Malaysia.
* Rule of law, stability of instns, not
higher taxes and welfarism, can lead
to higher income of the people.
http://bworldonline.com/low-zero-
income-tax-can-mean-development/

5. Comparative tax rates in selected Asia-Pacific economies, in %
Source: Deloitte, https://dits.deloitte.com/#DomesticRatesSubMenu/
* Effective rate varies; ** VAT reduced rate is 0/5; SST is 5-150; *** Reduced rate is 0/3/5
.
Country/
Economy
Corporate income tax Withholding tax VAT or GST
ratesStatutory rate Branch rate Dividends Interest Royalties
Philippines 30 30/15 15/30 20 30 V: 12
Indonesia 25 25/20 20 20 20 V: 10
Malaysia 24 24 0 0/15 10 G: 6
Thailand 20 20/10 10 0/10/15 15 V: 7/10
Vietnam 20 20 0 5 10 V: 10 **
Singapore 17 17 0 0/15 0/10 G: 7
China 25 25 10 10 10 V: 6/11/17 ***
Korea 25* 25/5-15 20 14/20 20 V: 10
Japan 23.4/23.2* 23.4/23.2 15.315/
20.42
15.315/
20.42
20.42 Consump: 8
Taiwan 20 20 21 15/20 20 V: 5
Hong Kong 16.5 16.5 0 0 4.95/16.5 0
Australia 30 30 0/30 0/10 30 G: 10
TRAIN is questionable partly because PH taxes in other transactions already high:
(1) Highest CIT, both statutory & branch rates. (2) Among highest in withholding tax for
dividends, with Japan & Australia. (3) Among highest in withholding tax for interest income,
with Japan & Indonesia. (4) Highest in withholding tax for royalties. (5) Among highest in VAT
& GST along with China.

7. Usually assigned to the
Federal Government
Concurrent, usually shared by
both Governments
Usually assigned to Regional/
State Governments
1. Currency
2. National Defense & Security
3. Treaties and Agreements
with other states
4. External trade
5. Citizenship
6. Major infrastructure projects
7. Customs/Excise taxes
8. Immigration
9. Economic Policy
1. Environment
2. Court system
3. Police
4. Corporate and personal
income taxes
5. Social Welfare
6. Cultural Development
7. Natural Resources
8. Tourism
9. Roads and Highways
1. Primary/Secondary
Education
2. Health Care
3. Local Governments
4. Licensing of public utilities
5. Regional finance – taxation,
budget, and audit
6. Housing and Social Security
Assignment of powers and functions bet federal and regional governments
• Rise in national taxes under TRAIN
• Number of Departments & bureaus
rising, not declining. DOTC became
DOTr + DICT. Planned creation of new
Dept. of Housing, Dept. of Fisheries,..
http://www.investphilippines.info/arangkada/wp-content/uploads/2016/11/FEDERALISM-101.-A-PRIMER-PUBLICATION-
COPY2-11122016.pdf
• Good set up: abolish many Departments (NEDA, DA, DENR, DOH, DOT,…), allow
regional or state governments to create their own Departments. Reduce national income
tax rates and VAT, allow state governments to create their own income taxes, VAT,…
http://bworldonline.com/dream-federalism-
reality-centralized-government/

8. Construction pd. Cost, P Bill
1. PNR South Railway (Manila-Bicol), 653 kms. Q3 2018 –2021 270
2. PNR North Railway (Manila-Clark) Q4 2017 – Q4 2021 255
3. Mega-Manila subway (Phase 1, QC-Taguig) Q4 2019 – 2024 225
4. Edsa-Central Corridor Bus Rapid Transit BRT (Edsa,
Ayala, Ortigas, BGC, NAIA)
Q1 2019 – Q1 2021 38
5. Mindanao Railway (Ph 1: Tagum-Davao-Digos), 105 kms Q3 2018 – 2022 36
Total 824
Source: DOTr, presented at the BWorld Economic Forum, Shangrila BGC, May 19, 2017.
Build-build-build
• Reversing integrated PPP (govt fiscal exposure is limited) to hybrid PPP where
national govt budget and foreign borrowings (especially China ODA) is bigger.
• Meaningful federal set up, empower state governments to deal with local infra
like airports, seaports, provincial tollways and inter-city MRT/LRT.
• Original target of TRAIN was about P135 B/year additional on top of regular
revenue increases. If those 4 big projects (#3, Mega-Manila subway was Japan-
initiated loan project, not PPP) were left as integrated PPP (total P600 B), zero
need for tax hikes or new taxes (P135B/year x 5 remaining years = P675 B).

9. New Iloilo Airport Mactan-Cebu Intl. Airport
Modality ODA (JICA-funded, Yen currency) PPP (private-funded, Pesos)
Delivery
period
9-years & 2-months, fr. NEDA ICC
submission to proj. completion, Jan. 1998 to
March 2007
5-years & 8-months, from NEDA
ICC submission to target
completion in June 2018
Terminal size 13,700 square meters 65,000 square meters
Project cost No contingencies, with cost overruns
resulting in +42% higher than approved cost
Cost overruns risks are
shouldered by the private sector
Source: Oliver Tan, Megawide Construction Corporation, presentation at the BusinessWorld
Economic Forum, May 19, 2017.
Mactan Cebu airport terminal almost 5x the size of the New Iloilo airport yet
construction time is almost half that of the latter. Cebu airport serves 17 intl
destinations, 27 domestic destinations, by 20 partner airlines. New terminal
finished middle of 2018, passengers are projected to enjoy benefits: check in time
from 10.5 minutes to 6.85 minutes; getting a luggage from 11 to 6.5 minutes; retail
outlets from 17 to 28, dining options from 17 to 31.
From this example alone, it is NOT true that burdening all taxpayers with
government-implemented infra projects is more beneficial to the public.
ODA vs PPP, or Hybrid vs Integrated PPP in airport construction

10. I. Operational projects, big ones Cost, $M Priv. partner/ proponent Agency/LGU
Power sector Operational 5,119
Sual coal plant, Pangasinan 1,200 Mirant, PH NPC
San Roque Hydro, Pangasinan 1,141 Marubeni/Kansai Electric Power/
Sithe Energies Inc (Japan)
NPC
Ilijan NatGas CC plant, Batangas 960 KEPCO (S. Korea) NPC
Pagbilao Coal power plant, Quezon 888 Hopewell Energy Intl (HK) NPC
Caliraya-Botocan-Kalayaan project 450 IMPSA (Argentina) NPC
Water sector Operational 8,382
MWSS Privatization 7,000 Maynilad Water, Manila Water MWSS
Casecnan Irrigation & Power, N. Vizcaya,
N. Ecija
650 California Energy (USA) NIA
Bulacan Bulk water supply 542 Luzon Clean Water Devt. Corp. MWSS
Subic Water & Sewerage, Zambales 120 BiWater/DMCI (Britain/Phil) SBMA
Transport sector Operational 3,161
LRT Line 3 (MRT 3) 655 MRTC (Phil.) DOTC
South Luzon Tollway Extension 478 Hopewell Crown Infra (HCI) DPWH/PNCC
Metro Manila Skyway 419 PT Citra PNCC (Indon/Phil) PNCC/TRB
Manila North Luzon Tollway 370 Manila N.Luzon Tollway Corp. DPWH/TRB
NAIA Expressway 352 Vertex Tollway Devt. Corp. DPWH
Big PPP projects that are Operational and Awarded/Under Construction
http://bworldonline.com/build
-build-build-possible-without-
new-taxes/

11. II. Awarded/Under Construction 10,228 Priv. partner/ proponent Agency/LGU
Transport sector 8,501
NAIA Development 1,657 To be determined DOTC
MRT Line 7 1,540 Universal LRT Corp (BVI) Ltd DOTC
LRT Line 6, Cavite 1,446 To be determined DOTC
LRT Line 1 Cavite Extension O&M 1,442 Light Rail Mla Corp. (LRMC) DOTC
Cavite-Laguna Expressway Proj. 1,234 MPCALA Holdings Inc. DPWH
Metro Manila Skyway Stage 3 592 CITRA Central E’way Corp
(CCEC)
DOTC
Mactan-Cebu Intl Airport Passenger
Terminal Building
389 GMR-Megawide Cebu Airport
Corp. (GMCAC)
DOTC
Other sectors: Water, Social, IT, Prop. 1,727
Source: PPP Center; DBM, BESF 2018
* User-pay principle via integrated PPP means only those who use the service or
facility will pay for its construction and maintenance, the rest of the population in other
parts of the country will be spared of such cost via current taxes (GAA) or future taxes
(ODA).
* The government’s PPP Center noted:
“most PPP bids received in recent years have come at lower than the approved
government costs. If in the instance that actual project costs turned out higher than
approved government costs, the private sector partner assumes or shoulders cost
overrun risk.”

12. * Coal power contributes 48% of total electricity production nationwide (2016 data) despite having
only 34% of total installed power capacity, electricity prices will further go up, slowly but surely.
* Natural gas is also fossil fuel but it was never slapped with excise tax.
* Exempting RE from VAT but retaining VAT for fossil fuels.
PH’s coal consumption in million tons oil equivalent (MTOE) is small compared to the consumption
of its neighbors in Asia. 2016 data: PH 13.5 MTOE, Taiwan 38.6, Indonesia 62.7, Germany 75.3, S.
Korea 81.6, Japan 120, US 358, India 412, China 1,888.
* Petroleum products are public
goods, not public bads, many
goods and services will experience
price hikes. Jeepneys, buses, taxi,
boats, airplanes.
* Farmers use tractors, ripper,
water pumps, harvest + threshing
combiner machines, tricycles.
Fishermen use motorboats.
Traders use trucks.
http://bworldonline.com/energy-
favoritism-train/

13. http://bworldonline.com/estim
ating-electricity-price-hikes-
resulting-train/
* Please note the revisions I made above

14. Life expectancy at birth
in the ASEAN, years
Country 1970 1990 2010 2015
Singapore 68.3 75.3 81.5 82.6
Brunei 67.0 73.1 77.6 79.0
Vietnam 59.7 70.4 75.0 75.8
Malaysia 64.5 70.8 74.2 74.9
Thailand 59.4 70.2 73.7 74.6
Indonesia 54.5 63.3 68.1 69.1
Cambodia 41.6 53.5 66.4 68.7
Philippines 60.8 65.3 67.8 68.4
Laos 46.2 53.6 64.3 66.5
Myanmar 51.0 58.7 64.9 66.0
Source: WB, World Development
Indicators database 2017
* If government is consistent, they should tax not only soda, powdered juice, energy drinks,
also cakes, ice cream, chocolates, cookies, yogurt, candy, pastries, sumalamig, banana-q,…
* Health alarmism: if all the claims of more diseases, morbidity and mortality due to high
sugar consumption, man-made climate change, etc -- then life expectancy of Filipinos
should be declining, not rising. Not true. There is rising life expectancy among Filipinos and
other people in the region and the planet.

15. http://bworldonline.com
/asians-freedom-high-
inflation-regulations/
Philippines is outlier” here, higher inflation when most neighbors have declining prices. Why?
Most proximate explanation is TRAIN law. Not all of the actual pass-through costs been done yet.
Expected inflationary pressure alone must have contributed to this

16. PH and East Asian econ. prospects
1. Population, million
1996 2016
Indonesia 197.0 258.7
Philippines 71.9 104.2
Vietnam 73.2 92.6
Thailand 60.1 69.0
Myanmar n/a 52.3
Malaysia 21.2 31.7
Camb, Laos,
Sing, Brunei 19.8 28.6
Total ASEAN 443.4 637.4
China 1,224 1,383
India 955.1 1,310
US 269.6 323.3
Japan 125.7 126.9
Germany 81.5 82.7
UK 58.2 65.6
Korea 45.5 51.2
Australia 18.3 24.3
Taiwan 21.5 23.5
HK 6.5 7.4
Source: IMF, World Economic Outlook April 2017, Database
1996 2016
Indonesia 274.7 932.4
Thailand 183.0 406.9
Philippines 91.8 304.7
Singapore 96.4 297.0
Malaysia 108.3 296.4
Vietnam 24.7 201.3
Myanmar n/a 66.3
Camb, Laos,
Brunei 19.8 28.6
Total ASEAN 790.1 2,549
2. GDP Size, Nominal, $ B
US 8,100.2 18,569
China 867.2 11,218
Japan 4,834.0 4,938.6
Germany 2,504.7 3,466.6
UK 1,394.5 2,629.2
India 399.8 2,256.4
S. Korea 598.1 1,411.2
Australia 425.6 1,259.0
Taiwan 292.7 528.6
Hong Kong 159.7 320.7
3. GDP Size, PPP, $ Billion
1996 2016
Indonesia 932.8 3,032.1
Thailand 437.8 1,164.9
Malaysia 245.4 863.3
Philippines 217.3 805.2
Vietnam 116.9 595.5
Singapore 126.4 492.6
Myanmar n/a 304.7
Camb, Laos,
Brunei 36.1 132.4
Total ASEAN 2,112.7 7,390.8
China 2,523.1 21,291.8
US 8,100.2 18,569.1
India 1,562.0 8,662.4
Japan 3,113.3 5,237.8
Germany 2,088.6 3,980.3
UK 1,278.2 2,785.6
Korea 596.7 1,934.0
Australia 439.5 1,187.3
Taiwan 358.7 1,132.1
Hong Kong 154.2 429.7

17. Conclusions
* Lower PIT should be a social goal and a public service in itself. Earning P500,000 (little
less than $10,000) or higher per year and slapped with 32% income tax is confiscatory,
qualifies govt. as creator of poverty. No need to raise or create new taxes somewhere.
* Instead of raising the top PIT rate to 35%, TRAIN should have cut it to 20% max, to (1) be
more comparable with MY, SG rates and (2) decentralization preparation, allow state govts.
to have their own income tax, excise tax, etc.
* Zero income tax countries have higher per capita income than most countries with income
tax. Rule of law, not high taxes and high welfarism, determines higher econ. development.
* Build-build-build is possible without tax-tax-tax. Integrated PPP and not hybrid PPP,
users-pay principle and not everyone-pays, more private funding and less govt loans/
spending, can ensure high infra spending.
* TRAIN has strengthened energy favoritism and cronyism, will contribute to higher
electricity prices, an anti-development path.
* Quick inflationary pressure set in. Expectations rather than actual pass-through costs
made PH high inflation become an “outlier” in the region.
* TRAIN 2 should not add more uncertainties of another round of tax- and price-hikes.
Planned CIT tax from 30% to 25% is not enough. Should go for 20% or lower as ave. CIT in
ASEAN already at around 21% and tax competition will further bring it lower.