Phl tax reform: Christmas gift to Filipinos

Happy New Year!!!

It’s official, the Philippine Government finally updated our tax policies after more than 20 years!! Although you could still argue IT’S NOT PERFECT but it is a step in the right direction not only for funding the queuing government projects but also a relief to the overtaxed middle class of this country.

I wrote last November 8th that this Tax Reform for Acceleration and Inclusion Act (TRAIN) might be delayed, I was proven wrong. The Tax Reform was signed by our President Rodrigo Duterte on December 19, 2017 and vetoed some provisions right after.

LATEST UPDATE: The president has vetoed the following: (1) Php500k a year exemption for self-employed and professionals from percentage tax; (2) Earmarking of incremental tobacco taxes; (3) Exemption of various petroleum products from excise tax; (4) Zero-rating of sales of goods and services to separate customs territory and tourism enterprise zones; (5) Reduced income tax rate of employees of Regional Headquarters (RHQS), Regional Operating Headquarters (ROHQS), Offshore Banking Units (OBUS), and Petroleum Service Contractors and Subcontractors.

As I mentioned in my last tax reform write-up, “I’m more inclined to talk about the ‘actual’ collections with the use of technology across the tax collecting departments (BIR, Customs, SSS, Philhealth, Pagibig) to name a few examples.

Civil Service Salaries in tax collection departments may need to be updated and upgraded and perhaps even an incentive system to mitigate graft and corruption. Imagine you are a tax collector with a salary of 15-20k, tasked to collect millions. That sort of temptation is enormous and real (unless if you are a saint).”

A quick summary of the Philippine Tax Reform:

Income Tax

* Current - Earning Php10k and below annually is taxed at 5 percent while those earning above P500k is subject to 32 percent

* TRAIN - Tax exemption for those earning P250k annually while those earning above P8M above is subject to 35 percent

Estate Tax

* Current - Progressive rate at 5 percent with maximum of 20 percent but still subject to penalty fees and exemption of family home valued at P1M

* TRAIN - Flat rate of 6 percent and family home exemption valued up to P10M

Tobacco Tax

* Current – under the sin tax law, the projected tax rate will be Php31.20

* TRAIN –transitional increase from 2018-2019 (P35 from July 2018-December 2019; P40 24 months) and 4 percent increase thereafter.

Tax on Sweetened Beverages

* Current – None

* TRAIN – P6/liter for non/caloric sweeteners; P12/liter for high-fructose corn syrup

Tax on New Vehicles

* Current – 2 percent for up to P600k; P12k + 40 percent of excess over P1.1M; P512K + 60 percent of excess over P2.1M

* TRAIN – 4 percent for up to P600K; 10 percent for P600k to 1M; 20 percent for P1 to 4M; 50 percent for above P4M

Tax on Petroleum Products

* Current – Zero for Diesel; while unleaded and premium gasoline is at P4.35 per liter

* TRAIN –

* For Diesel

o Php2.5/liter (2018)

o Php4.5/liter (2019)

o Php6/liter (2020)

* For Gasoline

o Php7/liter (2018)

o Php9/liter (2019)

o Php10/liter (2020)

Although some groups might see this measure as a negative, saying that the greater take home pay will be offset by the more expensive food and drinks and transport costs, it’s a matter of PERSPECTIVE. You either have a solution to every problem or always see a problem for every solution.

To me, this is an opportunity for Filipinos to be more financially educated by spending, saving and investing their money wisely. What’s your excuse?

* * *

The writer wears many hats: RFP®–Registered Financial Planner | Licensed Real Estate Broker | Public Speaker | Content Creator- www.vernongo.com; Vice-Chair- www.cebucontentcreators.com