The document summarizes Bienvenido S. Oplas Jr.'s presentation on the TRAIN law and issues related to federalism, public-private partnerships, and other economic policies in the Philippines. Some key points from the presentation include: - Income tax rates were reduced overall by the TRAIN law but remain relatively high in the Philippines compared to neighboring countries. - Countries with zero income tax like Singapore and Hong Kong tend to be wealthier and have stronger institutions compared to countries that impose income tax. - The TRAIN law could have done more to lower the VAT rate and reduce exemptions to raise revenues, rather than increasing personal income tax rates.

1. DeLoitte TRAIN forum
Ascott BGC, Taguig City
January 25, 2018
TRAIN law vs Federalism, PPP and
other economic distortions
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. Country/
Economy
GDP per capita, 2016 Instns, 2017-18
Nominal $ PPP $ Rank Score
A. Zero income tax *
Qatar 60,787 127,660 10 5.60
Brunei 26,424 76,884 40 4.43
Kuwait 26,005 71,887 57 4.05
UA Emirates 37,678 67,871 5 5.93
Saudi Arabia 20,150 55,158 26 5.01
Bahrain 24,183 50,704 23 5.04
Oman 15,964 46,698 28 4.96
Bahamas 24,272 24,555
B. Developed Asia
Singapore 52,961 87,855 2 6.08
Hong Kong 43,528 58,322 9 5.69
Taiwan 22,453 48,095 30 4.85
Japan 38,917 41,275 17 5.41
S. Korea 27,539 37,740 58 4.04
C. ASEAN 5
Malaysia 9,360 27,267 27 4.98
Thailand 5,899 16,888 78 3.80
Indonesia 3,604 11,720 47 4.27
Philippines 2,924 7,728 94 3.51
Vietnam 2,173 6,429 79 3.79
Per capita GDP of zero income tax economies and selected Asians
Sources: (a) GDP per capita GDP income, nominal and PPP values: IMF, World
Economic Outlook database, April 2017.
(b) Institutions: WEF, Global Competitiveness Report 2017-2018.
.
* Zero income tax is done in 10
countries and jurisdictions. 8 here +
Bermuda & Cayman islands.
Last 2 have no data at IMF and WEF.
* 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.

4. RCEP + HK, Taiwan TTR, % of profit Top marginal income tax rate, %
2012 2017 1980 1990 2000 2015
1. Brunei 16.8 8.7 0
2. Singapore 27.1 19.1 55 33 28 20
3. Cambodia 22.5 21.0 20
4. Laos 33.3 26.2 24
5. Indonesia 34.5 30.6 50 35 35 30
6. Thailand 37.5 32.6 60 55 37 35
7. Vietnam 40.1 39.4 40 („05) 35
8. Malaysia * 34.0 40.0 60 45 29 25
9. Philippines 46.5 42.9 70 35 32 32
10. Myanmar -- -- 40 25
Hong Kong 23.0 22.9 15 25 17 17
S. Korea * 29.7 33.1 89 64 44 42
Taiwan 35.6 34.5 60 50 40 45
New Zealand 34.4 34.3 61.5 33 39 33
Australia 47.7 47.6 62 49 47 47
Japan 49.1 48.9 75 65 50 56
India 61.8 60.6 60 53 30 35
China * 63.5 68.0 45 45 45 45
Canada 28.8 21.0 60-68 44-54 44-51 40-55
UK 37.3 30.9 83 40 40 45
US 46.7 44.0 70-75 33-42 40-46 44-51
Germany * 46.7 48.9 65 53 56 47
Sources: (a) TTR
-- Paying Taxes
2012 Report,
2017 Report.
(b) TMITR –
Fraser Institute,
Economic
Freedom of the
World (EFW)
2017 Report
Good news:
Over the past 5
years, many
countries and
governments
have learned to
cut their various
taxes and fees.
Bad news: even
after such
decrease, TTR
levels remain
high.

5. VAT rates in ASEAN 5
(PH, ID, TH, VN, MY)
Chart source: Sen. Panfilo Lacson
* PH has highest VAT rate in the ASEAN. So many
industries and sectors have lobbied and
succeeded in getting VAT exemption.
* TRAIN should have slashed it to 6% with zero
exemption except raw agri and fish products, or
8% - 10% with few exempted sectors.
* Tax competition is ongoing in the region.
• Average corporate tax rate in Asia fell from 29%
in 2006 to 21% in 2017.
• UK corporate tax rate fell, 30% to 19%.
• US corporate tax rate fell, 35% to 21%.
• Hong Kong‟s 16.5% still on the low side but its
competitive advantage no longer as significant.

6. Usually assigned to the
Federal Government
Concurrent, usually shared by
both Governments
Usually assigned to Regional/
State Governments
1. Currency
2. National Defense and
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,…

7. 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 revenue goal of TRAIN -- some P160 B/year additional revenues on top
of regular revenue increases. If those 5 big projects alone were left as
integrated PPP, there would be zero need for tax hikes or new taxes.
(P160B/year x 5 remaining years = P800 B).

8. 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

9. 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
Education (mainly “PPP School Infra”) 451 Bright Future, Citicore-Megawide
Consortium
DepEd
Property (mainly “Pabahay sa Riles”) 450 New San Jose Builders PNR/NHA
IT (mainly “Land Titling Computeriz’n”) 185 Land Registration Sys, Inc. (PH) LRA
Big PPP projects that are Operational and Awarded/Under Construction
… without prior tax-tax-tax

10. 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.”

11. Excise tax and VAT, fossil fuels
vs renewables
Excise tax, fossil fuels Current 2018 2019 2020
1. Diesel, P/liter 0 2.50 4.50 6.00
2. Gasoline, P/liter 4.35 7.00 9.00 10.00
3. LPG, P/kg 0 1 2 3
4. Others: Bunker Fuel 2.50, Petcoke 2.50, Kerosene 3, Av gas 4, Naptha 7; P8
for Asphalts, Ref. fuel, Lubricating oil, Paraffin wax
5. Indigenous petroleum 3% 6% 6% 6%
6. Coal, P/ton 10 50 100 150
* Natural gas 0 0 0 0
VAT: RE (still exempted) 0 0 0 0
VAT: fossil fuels (retained) 12% 12% 12% 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.
* Nat gas not mentioned,
* Petroleum products are
public goods, not public
bads, many goods and
services will experience
price hikes. Not only
jeepneys, buses, taxi,
boats, airplanes. Farmers
now use tractors, water
pumps; harvest + threshing
combiner machines.
Fishermen use motorboats.
Traders use trucks.

12. 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.

13. 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

14. Conclusions
* PIT cut rate should be a social goal and a public service in itself. Earning P500,000 (little
less than $10,000) or higher per year and be slapped with 32% income tax is confiscatory,
immediately qualifies the government 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.
* Society should reward people who become rich and wealthy via entrepreneurship and
efficient professional work, not demonize and over-tax them. We should have more
millionaires and billionaires, not less; we should have more super-rich people, not less.
* Federalism can be more attractive to the people, central national government should learn
to step back, tax less, regulate less, bureaucratize less, people and investors in the
provinces have more leeway, more opportunities to craft their own political and economic
identity.
“I hope we once again have reminded people that man is not free unless government is
limited. There's a clear cause and effect here that is as neat and predictable as a law of
physics: as government expands, liberty contracts.”
-- Ronald Reagan, former US President.