TRAIN or no TRAIN: A forecasted scenario examining tax measures
Date
2019
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Abstract
This paper compares the Comprehensive tax reform
program, also known as TRAIN law as Republic act No.
10963, to a forecasted scenario, using regression models with
ARIMA errors, where the TRAIN law did not occur and
continued on with the same tax regime to the years prior to
gain an insight on the effectivity of the tax reform in attaining
additional revenues. The regression models with ARIMA
errors used for forecasting is achieved by comparing target
revenues projected ex ante by policy makers to actual revenues earned.
The study will also look into the tax buoyancies, a measure
of total response of tax revenue to its corresponding tax base,
and tax elasticities, which measures total response of tax
revenue to the base while holding discretionary changes
constant, of the previous regime from 1998-2017 to evaluate
its performance. Tax elasticities play an important role in
constructing accurate forecasting and policy
recommendations. The purpose of the research is to justify a
need for a tax reform and to determine whether the tax reform
was successful in raising additional revenues. Our findings
reveal that the tax reforms introduced in the TRAIN law has
increased tax revenue collections in the Philippines.
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Keywords
TRAIN law, tax, Philippines, VAT, Excise tax