STARTING January 15, Filipino workers will see reduced personal income taxes in their paychecks.
Social worker Ariel Odtojan said he expects more take-home pay this month following the approved adjustment on personal income tax.
“I am happy about the additional take-home pay, like any other employee. It’s helpful because we can use (the additional amount) for our daily expenses and long-term savings,” said Odtojan, who started his own family last year.
President Rodrigo Duterte signed Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (Train) Act last Dec. 19. The law took effect on Jan. 1.
TRAIN lowers the personal income tax of salary earners but raises the excise tax on a host of goods and services, including fuel, cars, sweetened beverages, tobacco, coal, oil products and cosmetic procedures.
“I am happy but at the same time worried about the implications of Train on the movement of prices of basic commodities,” said Odtojan.
Business process management (BPM) employee Alfredo Compra Jr., in a separate interview, said the Train law is favorable to BPM workers, as it raises their take-home pay and encourages higher productivity.
“Unlike the current tax system, which has unfairly burdened the working class, the law will greatly contribute in increasing funding for health, training, and infrastructure investments—crucial items for us, who are the most vulnerable to physical and mental health issues,” said Compra.
Bureau of Internal Revenue (BIR) Revenue Region 13 Assistant Regional Director V Cadangen yesterday said individual tax payers should see tax adjustments in their paychecks starting Jan. 15, as the law took effect at the start of the year.
However, he clarified that salary and earnings of taxpayers last year will still be taxed according to the old rates when they file their income tax returns (ITR) before the April 16 deadline.
“The April deadline covers the 2017 taxable year so the applicable rate is the old law. Employees will not be getting any refund for 2017. What was withheld will be remitted to the BIR,” said Cadangen. “Nevertheless, employees will feel the impact this January. Withholding tax should be lesser this January compared December of last year.” Cadangen noted though that the general effect of the tax adjustment is that there would be high net take home starting this year.
Those earning an annual gross income of P250,000 and below or about P21,000 a month are exempted from paying income tax under the Train Law. This means that starting this year, they no longer need to file an ITR.
Salaried workers with taxable income of above P250,000 will be subject to a tax rate of 20 percent to 35 percent effective this year, and 15 percent to 35 percent effective 2023 onwards.
Thirteenth-month pay and other bonuses amounting to P90,000 are likewise tax-exempt, giving Filipinos more money to spend during the Christmas season.
The National Economic Development Authority (Neda) 7 has pointed out that an increase in spending activity of the working class will be enhanced with the implementation of the tax reform law.
According to Cadangen, they expect January to March to be a transition phase and normalcy to start by April this year, as they are yet to determine the reaction of the market once all these tax adjustments are carried over in the prices of sugar sweetened beverages, fuel, automobile, among other goods and services.
Cadangen said the BIR Cebu hasn’t received its 2018 collection target yet from the Department of Finance.
“It is going to be difficult because Train covers a lot of tax adjustments and it’s difficult to anticipate how the taxpaying public would react to these. We don’t really know yet how all these will impact the consumers,” said the BIR official.
Moreover, Cadangen said they aren’t sure yet when consumers will feel the impact of the hike of excise tax on the prices of goods.
“When the excise tax on tobacco was implemented before, the practice of manufacturers that time was that they downloaded (tobacco) during November and December to take advantage of the old tax rate. So, January and February, they still had the same prices, but by March prices went up already,” Cadangen explained.
“For beverages, I don’t know if they downloaded a lot and for how many weeks or months is the supply. But as soon as the old inventories are consumed, the new rates will apply,” he said.