IMPACT OF THE IMPLEMENTATION OF TAX REFORM FOR ACCELERATION

AND INCLUSION (TRAIN) LAW ON MINIMUM WAGE EARNERS

A Thesis
Presented to the Faculty of
College of Accountancy, Business, Economics and
International Hospitality Management
Batangas State University
Batangas City

In Partial Fulfillment
of the Requirements for the Degree
Bachelor of Science in Acountancy

By:
Bico, Jaytrex
Dalisay, Niña Andrea D.
Gutlay, Julie Ann Fe S.

2023

Chapter 1
 THE PROBLEM

This chapter deals with the presentation of the problem. Specifically, this

presents an introduction, the background of the study, statement of the problem,

theoretical framework, conceptual framework, hypothesis of the study, scope and

limitations of the study, significance of the study, and definition of terms.

Introduction

Every nation aspires to become one of the developed countries, therefore, it is

necessary to have a plan in place that outlines the specific goals and objectives of one

country. The plan should take into account the nation's resources, culture, and should

prioritize areas such as economic growth, human development, political stability,

environmental sustainability, and social equity. In addition, it is important to establish

effective governance structures that can oversee the implementation of the plan and

ensure that progress is being made towards the nation's development goals.

Philippines being considered as one of the developing countries takes a step to

implement a tax system that is sought to raise revenue in order to fund Duterte

Administration’s 2022 and 2040 visions wherein it aims to eradicate property, develop

inclusive institutions that will provide equal opportunities for everyone, and the elevation

of the Philippines to the rank of a higher-income nation. This tax reform program is

known as Tax Reform for Acceleration and Inclusion (TRAIN) Law or the Republic Act

No. 10963 which is implemented in the Philippines in 2018. This law includes lowering

the income tax rates for individuals, increased revenues for the government, reduced

corporate income tax rates and improved public transportation.

Some critics argue that it has placed an additional burden on consumers, particularly

the poor through higher taxes on certain goods and services. It involves an increase in

excise tax on fuel, sugary drinks, and tobacco products, inflation, higher cost of living

and reduced subsidies for social services.

As the government redesigned the tax system in the Philippines several sectors

are affected and one of which is the minimum wage earners. Its impact is complex and

multifaceted since on its positive side, it increased the tax-exempt threshold from PHP

250,000 to PHP 250,000- PHP 500,000, which provided some relief for low-income

earners, including minimum wage earners. Additionally, the TRAIN Law implemented a

13th-month pay exemption for employees whose annual compensation does not exceed

PHP 90,000, which could benefit some minimum wage earners.

On the other hand, the TRAIN Law also increased the excise tax on fuel, sugary

drinks, and other goods and services, which led to an increase in the prices of basic

commodities. This increase in prices disproportionately affected minimum wage

earners, who already struggle to make ends meet with their limited income.Furthermore,

the TRAIN Law also removed some exemptions and deductions for personal income

tax, which could increase the tax burden on minimum wage earners who earn just

above the tax-exempt threshold.

The researchers aim to identify the impacts of TRAIN law on minimum wage

earners regarding their take home pay, daily consumption and cost of living. Moreover,

this study wanted to determine how the respondents are able to comply with their daily

expenses.
Background of the Study

Republic Act No. 109963, popularly known as the Tax Reform for Acceleration

and Inclusion (TRAIN) Act, the first package of the Comprehensive Tax Reform

Program (CTRP) aimed at creating a more equal and transparent tax system, was

signed into law on December 19, 2017 by President Rodrigo Roa Duterte. The TRAIN

will bring significant income tax cuts to the majority of Filipino taxpayers, producing

funding for the government's "Build, Build, Build" and social welfare initiatives.

The Tax Reform for Acceleration and Inclusion (TRAIN) Act resulted in numerous

modifications. Petroleum merchants, public markets, convenience stores, and even

sidewalk sellers altered their price lists (Paz, 2018). According to an article posted by

the Philippine Canadian Inquirer headlined, Here's What the TRAIN Law Means for

Filipinos (2018), the TRAIN Law increased the price of basic products and commodities.

Those struggling to make ends meet on meager wages prefer to call it a blessing, while

others labeled the TRAIN law as anti-poor because it set a chain of price increases for

consumer goods. It is up to the individual to handle his own money and develop better

financial habits. Some of the consequences of TRAIN law implementation include

increased product prices, including fuel prices, commensurate hikes in transportation

tickets, electricity rates, and a new sugar tax.

This research is a significant and timely concern in this country, as it tries to

analyze the low-income earners who are now affected by the country's current inflation

rates and tax changes. Furthermore, this research focuses on the responses and

subjective perspectives of Filipinos, and it discusses how this law affects society,

particularly low-income earners, and how they coped after the Tax Reform for
Acceleration and Inclusion (TRAIN) Law was implemented. The researcher would like to

recognize low-income earners for their insights and feedback on the inflation rate in

common goods. This study seeks to increase community responsiveness and

understanding of TRAIN law, particularly among low-income earners, in order for them

to comprehend its purpose and intent, which is, in reality, beneficial to all Filipinos. And

also, this study seeks to determine how this law can contribute to a better Philippines, a

pleasant place to live with better opportunities and panoramas for all Filipinos.

Statement of the Problem

The aim of this study is to determine the impacts of Tax Reform for Acceleration

and Inclusion (TRAIN) law on minimum wage earners, as well as how they are able to

comply with their daily expenses.

Specifically, this study seeks to answer to the following questions:

1. What is the profile of the respondents;

1.1 Age of the respondents;

1.2 highest educational attainment;

1.3 Civil status

1.4 number of members in the family; and

1.5 average monthly income?

(TRAIN) law affects the minimum wage earners in terms of;

2.1 Net take home pay;

2.2 Daily consumption; and

2.3 Cost of living?

3. How can minimum wage earners comply with their daily expenses due to the

implementation of TRAIN Law?

4. Is there a significant relationship between the impacts of TRAIN Law on the

capabilities of the minimum wage earners in complying with their daily expenses?

5. What proposed strategies may be implemented to improve budgeting skills of

minimum wage earners upon implementation of TRAIN Law?

Theoretical framework

Keynesian Economics Theory of Keynes (1930) centered on macroeconomic

dynamics in which it highlights the responsibility of the government in providing

economic security to its citizens most especially the poor. It is believed that the total

development in income is ultimately the most effective approach in poverty elimination.

Wherein, publicly funded capital plays a crucial part in economic prosperity. However,

this publicly offered capital is employing excessive inflations for the government to

supply development to the economy. In line with this, the researchers will stress the
chosen poor income class households on their idea if the TRAIN law promotes

economic growth in the country through inflation rates as well as to eradicate poverty.

According to Layson (2020), the TRAIN Law, also known as the Tax Reform for

Acceleration and Inclusion bill, was signed by Rodrigo Duterte, the president of the

Philippines. This is regarded as the first set of tax reform proposals made by the Duterte

administration with the goal of implementing a more equitable and straightforward tax

system for Filipinos. Although the TRAIN Law has provisions that are notably helpful to

people with lower incomes, many Filipinos, especially those who fall into the poor

category, will find these requirements to be quite burdensome. Many individuals from

many social strata have already noticed the effects of this tax reform in their day-to-day

lives. The first Php 250,000 of annual taxable income is exempt from taxes under the

TRAIN Law. Beginning in 2018, Filipinos will also be required to pay higher excise taxes

on items including automobiles, petroleum, cigarettes, coal, and mining in addition to

excise taxes on sugar-containing beverages, which would drive up the cost of several

commodities. The TRAIN Law has a significant impact on people who work for minimum

wage or in jobs with irregular, poor, or irregular pay. It may be concluded that although

these minimum wage individuals are excluded from paying income taxes, the

implementation of the TRAIN Law has had a significant negative impact on their take-

home pay and daily expenses, contributing to an increase in the poverty rate.

Additionally, this demonstrates an increase in cost of living as a result of higher fuel and

excise taxes, which had an impact on the cost of goods.

This section provides a clear view of the study to be undertaken by the researchers

INPUT PROCESS OUTPUT

Profile of the
Respondents
 Age of the
respondents
 Highest
educational
attainment
 number of
members in  Data
the family Gathering
 average through Release
monthly Survey Pamphlets or
income Questionnaire
Digital poster
Impacts of Tax
Conduct Seminars/
Reform for
Acceleration and Webinars
 Analysis and
Inclusion (TRAIN)
Interpretation
law on the minimum of data
wage earners
 Net take
home pay
M
 Daily
consumption
 Cost of living

Figure 1
Conceptual Framework
 In this study, the Input- Process- Output (IPO) model is used to illustrate the

impact of Tax Reform for Acceleration and Inclusion (TRAIN) law and the capabilities of

the minimum wage earners to pay their daily expenses.bh

The input consists of the demographic profile of the respondents such as age,

highest educational attainment, number of members in the family and average monthly

income. Also included in the input are the Impacts of Tax Reform for Acceleration and

Inclusion (TRAIN) law on minimum wage earners in terms of net take home pay, daily

consumption and cost of living.

The process of the study shows the procedures that the researchers needed in

order to gather the data. This includes generating response from the respondents by

gathering data through conducting surveys, analyzing and interpreting data gathered to

arrive at the best possible result. After gathering all the information needed, the

researcher will proceed with the analysis.

The output of the study will be the proposed interventions that will help the

minimum wage earners to properly allocate and manage their finances in complying

with their daily expenses resulting from the implementation of TRAIN Law. These can

be formulated with the help of the information gathered through the use of inputs and

the implementation of processes.

At the 0.05 level of significance, the given research hypotheses were tested. The

study tests the hypothesis given below

Ho1. There is no significant relationship between the impact of Tax Reform for

Acceleration and Inclusion (TRAIN) Law and the capabilities of minimum wage earners

to comply with their daily expenses.

Scope and Limitations of the Study

This study aimed to determine the impact of the implementation of TRAIN law to

the minimum wage earners. This research is limited only to the minimum wage earners

who served as the respondents for this study. They also limited the research locale to

the selected Barangay in Batangas City.

This study focused on two variables: the implementation of Train law as an

independent variable and its impact on the minimum wage earners as a dependent

variable. The researchers used primary data. To conduct their study the researchers

made an interview with the participants. This research study primarily focused on the

impact of TRAIN law on the minimum wage earners in Batangas City in terms of their

demographic profile such as their age, educational attainment, civil status, number of

the members in the family, and average monthly income. It also involved the effects of

implementation of such law to the minimum wage earners in terms of the following: (net

take home pay, daily consumption, and cost of living). Lastly, it also involved the
assessment on how tue minimum wage earners comply with their daily expenses after

the implementation of TRAIN Law.

Significance of the Study

This study intends to determine the impact of implementation of Tax Reform for

Acceleration and Inclusion Law (TRAIN Law) on the minimum wage earners on the

selected Barangay in Batangas City. The researchers believed that the study would be

beneficial to help and guide the following:

To the Minimum wage earners, this study will be a big help for the minimum wage

earners to know about the other changes that happened after the implementation of

TRAIN law aside from the increase of the prices basic commodities.

To Department of Labor and Employment, this study will be big help to the

Department of Labor and Employment for the reason that they will be able to hear the

side of the people especially the minimum wage earners with regards to the level of

changes that happened to them after implementation of TRAIN Law.

To Bureau of Internal Revenue,

To the College of Accountancy, Business, Economics, and International

Hospitality Management (CABEIHM), this study will be another success in their field

of research. This can also serve as their resource material for other students who are

enrolled in their department that will give them a deeper understanding about TRAIN

Law and its impact.

the questions they sought to answer. This study is a good opportunity to enrich their

knowledge regarding TRAIN Law, especially its impact on the minimum wage earners. It

will be one of their accomplishments as this study can provide knowledge for those

concerned about this topic.

And lastly, to future researchers, this study will serve as a basis and reference for

those students who would like to conduct a similar study. The findings and other

information of this study will be helpful for them to further improve and enhance their

topic.

Definition of terms

To have a better understanding the researcher had worked carefully to define the

following term used in the study that is defined both conceptually and operationally.

Cost of living.

Daily Consumption.

Daily Expenses.

Minimum Wage Earners. According to Paul (2018), minimum wage earners are

those earning within the statutory minimum wage that are established by the Regional

Tripartite Wage and Productivity Board (RTWPB) of the Department of Labor and

Employment (DOLE). In this study, it is used as the respondents in order to determine

the impact of the implementation of TRAIN Law and how they are able to comply with

their daily expenses.

Net take home pay.

large income tax cuts for the majority of Filipino taxpayers while raising additional

revenue to assist sustain the government’s faster expenditure on its “Build, Build, Build”

and social services projects (Department of Finance, 2017) .In this study, this serves as

the independent variable that will be used by the researchers to identify the effects of

the law and its significant relationship with the daily expenses incurred by minimum

wage earners.
References:
Minimum wage earners
https://steemit.com/philippines/@paulthebeloved/philippines-tax-updates-train-law-and-
the-minimum-wage-earners
Train law
https://taxreform.dof.gov.ph/news_and_updates/the-tax-reform-for-acceleration-and-
inclusion-train-act/