Editorial: Rainy-day mentality

ABUNDANCE of diminishing returns. Cebu City public school teachers expressed their apprehensions to SunStar Cebu’s Justin K. Vestil in a Jan. 6 report that increases in their take-home pay and allowances starting this January will not amount to much due to price hikes in gasoline and basic commodities caused by the implementation of the Tax Reform for Acceleration and Inclusion (Train) Law.

The Train Law or Republic Act (RA) 10963 took effect on Jan. 1, replacing the National Internal Revenue Code (NIRC).

Under the Train Law, about seven million employees earning not more than P250,000 are exempt from personal income tax. The 13th month pay and other benefits that are below P90,000 are also exempt from taxes.

However, the Train Law also abolishes previous deductions allowed under the NIRC to compute for the taxable income, such as the P50,000 personal exemption, the additional exemption of P25,000 for every dependent child, and the P2,400 annual premium for health and hospitalization insurance.

Lawmakers of the Makabayan bloc will file a petition with the Supreme Court to question the legality of the Train Law. ACT Teachers Party-list Rep. Antonio Tinio told media that the public are the “biggest losers” as the Train Law’s addition of excise tax on oil and gasoline will increase the prices of goods and services.

Public fears concerning the Train Law reveal the inadequacy of Filipinos’ financial literacy.

“The Philippine financial literacy program is comprehensive,” Finance Undersecretary Gil Beltran reported during the 10th Financial Literacy Summit last April 20, 2016, according to the Department of Finance (DOF) website.

Financial literacy usually refers to an individual’s knowledge and skill to manage his or her resources to attain personal goals and long-term security. However, financial literacy or illiteracy also encompasses communal or social goals since citizens’ capacity to handle resources and respond to financial challenges benefits or deters communal or national development.

Beltran correctly pointed out that the country’s financial literacy program should “cover everyone, all from ages five to 100.”

However, the government, the private sector, and civil society should see the inadequacy of the present program’s major educational activities: financial education conducted in schools and lectures for overseas workers and workers in the business process outsourcing (BPO) sector.

Microfinance and micro-insurance programs of the DOF may benefit millions of micro-entrepreneurs and -borrowers, but there is a need to sustain the drive at the grassroots, communal level.

Many Filipinos have minimal or no savings to invest and secure a better financial standing for their families.

“Technology has enlarged access to financial services,” Beltran pointed out in 2016.

Technology is also a two-edged sword. While enabling faster and more cost-effective transactions over great distance, mobile phones, ATM cards, computers, electronic gadgets, and the Internet push consumerism and spending on non-essential goods.

While websites present the financial (stocks, bonds, insurance and mutual funds) products available in the market, these cannot compete with consumer products or services in the priorities of many citizens, who are either ignorant about these opportunities or incapable of investing.

Consumers continue to fall victim to electronic fraud and criminal activities, exposing a gap between campaigns to educate the public and citizens’ awareness and vigilance.

Even in assessing the full impact of the Train Law, the government and private sector, particularly the media, should conduct an information and education campaign to explain to citizens what are the full changes brought about by RA 10963.

While the affluent seek the advice of tax lawyers, wage-earners fall back on trial-and-error to make both ends meet and prepare for the future. Or until they become financially literate.
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