PH 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 queueing 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% while those earning above Php500k is subject to 32%

§  TRAIN - Tax exemption for those earning Php250k annually while those earning above Php8M above is subject to 35%

Estate Tax

·         Current - Progressive rate at 5% with maximum of 20% but still subject to penalty fees and exemption of family home valued at Php1M

·         TRAIN - Flat rate of 6% and family home exemption valued up to Php10M

Tobacco Tax

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

·         TRAIN – transitional increase from 2018-2019 (Php35 from Jul 2018-Dec 2019; Php40 24 months) and 4% increase thereafter.

Tax on Sweetened Beverages

·         Current – None

·         TRAIN – Php6/liter for non/caloric sweeteners; Php12/liter for high-fructose corn syrup

Tax on New Vehicles

·         Current – 2% for up to Php600k; Php12k + 40% of excess over Php1.1M; Php512K + 60% of excess over Php2.1M

·         TRAIN – 4% for up to Php600K; 10% for Php600k to 1M; 20% for Php1 to 4M; 50% for above Php4M

Tax on Petroleum Products

·         Current – Zero for Diesel; while unleaded and premium gasoline is at Php4.35 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?

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Also Published in Philstar - The Freeman Newspaper last January 02, 2018.