Heads Up Tax Payers, The TRAIN is Coming
As per the table of tax comparisons in Asia, Philippines is tied with India for having the highest tax rate based on taxable profit at 30%. This fuels the argument that the “poor becomes poorer, and the rich becomes ultra-rich.”
This is why currently, the majority of consumers – who are taxpayers at the same time – find it hard to strike a balance between budget and expenses.
However, this inequity is expected to be eradicated as soon as Ways and Means Committee Chairman Rep. Dakila Cua finally pass the comprehensive tax reform to the House plenary. The Tax Reform for Acceleration and Inclusion, also known as TRAIN, aims to free those earning an annual income of less than P250,000 from paying any tax. It then transfers the burden to elite capitalists earning more than P5 million as they’ll be taxed at 35%, as opposed to the current 32%.
What’s in it for the government? It will spearhead the government’s efforts to rebuild our country’s infrastructure by raising an expected amount of P82 billion.
How does a deep cut in income taxes help the government in raising funds for a variety of purposes?
- Rewards the working class with higher disposable income.
Let’s admit it –we all frown upon our pay slips when it shows that a huge chunk of our salary goes to income tax. With past issues about the government’s misappropriation of funds, it’s easy to get discouraged about where our taxes are headed to.
Under the proposed tax reform, hundreds or thousands peso worth of foregone money can now be allocated for household use (e.g., food, education, travel, insurance, leisure, etc.). It can also serve as a buffer to cover for uncertain events in the future.
- It will raise consumption, corporate, and excise taxes.
As the saying goes, there’s no such thing as a free lunch. Though the working class will be freed from paying income taxes, they’ll face more stringent value added tax (VAT) coverage.
The good thing here, meanwhile, is that the taxpayer gets to control the amount of his taxes on purchases through planning, rather than being withheld on a lump-sum twice monthly.
Corporate taxes will be upped by 3%, while new excise taxes on products like sugar-sweetened beverages and refined petroleum cover the rest of the tax reform package.
Taxes on automobiles are also expected to double.
It has to be noted that the tax reform bill is a win-win situation for both the government and paying consumers. Even if it appears to be punishing consumers for raised consumption taxes, the net effect for them remains to be positive according to the Department of Finance.
Let’s take for instance the average salary of a Customer Service Representative working in Metro Manila. Using the Department of Finance’s prototype tax calculator for the said tax reform, HR practitioners will be able to compute for employees’ taxes with ease.
- Select employee marital status. For this illustration, we’ll assume it as single.
- Select type of employer. Business process outsourcing (BPO) companies are typically run by private foreign entities.
- Enter gross monthly income. Computation: P239,851/12 = P19,987.58
- The system automatically calculates the new tax due. From a whopping P2,683.86 to P0.00. Talk about savings!
- Don’t forget to indulge yourself. Whether it’s for munching that much-deserved dessert or getting that sigh of relief upon paying one’s car loan, everybody loves a higher disposable income.
What’s your take on the proposed tax reform? Share your argument below.
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