Why must the Filipino bear the burden of a broken system?
In a nation where thrift is a virtue and saving is a lifeline, the overarching question above bears asking. The imposition of a uniform 20% tax on interest income from bank deposits under Republic Act No. 12214 feels less like reform and more like betrayal. The Filipino depositor who is already battered by inflation, stagnant wages, and economic uncertainty is now asked to surrender a fifth of their modest earnings from savings. The question that echoes across households and bank queues is simple yet profound: Why must the people pay for the government’s fiscal failures?
The Department of Finance insists this is not a new tax, but a “rationalization” of existing rules. Yet the reality is stark: long-term deposit instruments, once protected by exemptions for tenors of five years or more, are now taxed at the same rate as short-term accounts. This erasure of nuance punishes prudence. It penalizes those who save for the future, for education, for retirement. It is a tax not on wealth, but on hope.
The government’s rationale hinges on “fairness” and “efficiency,” claiming that the old system favored the wealthy. But this argument collapses under scrutiny. The Bank Secrecy Law (RA 1405) and the Anti-Money Laundering Act (RA 9160) already provide mechanisms to monitor and regulate suspicious financial activity. The issue is not the tax rate but the lack of progressive enforcement. Why not tax luxury assets, speculative investments, or offshore holdings instead of the humble savings of ordinary citizens?
Moreover, the Constitution of the Philippines, under Article XIII, Section 1, mandates the State to “give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities.” How does taxing the interest of a ₱10,000 savings account align with this constitutional promise? Where is the dignity in watching one’s hard-earned interest shrink under the weight of a policy designed to “level the playing field”?
The Medium-Term Fiscal Framework (MTFF) projects ₱25 billion in revenue from this tax by 2030. But at what cost? This is not just a financial transaction but a moral transaction. The government is asking the poor to subsidize its deficits, while offering vague promises of infrastructure and capital market access. Yet for many Filipinos, the stock market is not a viable alternative but a distant, volatile abstraction. Their savings are not investments; they are lifelines.
The law’s defenders argue that 99.6% of deposits were already taxed under the old system. But this statistic obscures the real issue: who benefits and who suffers. The 0.4% who enjoyed exemptions were not the problem; they were the model. Encouraging long-term saving should be a national priority, not a taxable offense. The removal of exemptions sends a chilling message: patience and prudence no longer pay.
This policy also undermines financial inclusion, a goal long championed by the Bangko Sentral ng Pilipinas. By taxing small interest earnings, the law discourages banking among the unbanked. It pushes people toward informal savings mechanisms, away from regulated institutions. In trying to clean the capital markets, the government may inadvertently dirty the trust between citizen and state.
Legally, the tax may not violate the Bank Secrecy Law or AMLA, but it certainly violates the spirit of social justice enshrined in our laws. It treats all depositors as equal in liability, but not in capacity. It assumes that a retiree with ₱50,000 in a time deposit should be taxed the same as a corporation with ₱50 million. This is not equity but an economic erasure.
According to a lawyer friend of mine, while not unconstitutional due to double taxation, RA 12214 may still be challenged on other constitutional grounds:
Violation of social justice principles under Article XIII, Section 1 of the 1987 Constitution.
Disproportionate burden on small savers, potentially violating the equal protection clause.
Erosion of incentives for long-term saving, which could be argued as contrary to the State’s duty to promote economic security.
The Filipino people are not asking for charity. They are asking for fairness. They are asking why, in a country where corruption scandals bleed billions, the solution is to tax the interest of the poor. They are asking why the burden of rebuilding a broken fiscal house must fall on those who did not break it. And they are asking, most of all, where is the justice in this tax?
If the government truly seeks reform, let it begin with accountability, not austerity. Let it tax excess, not endurance. Let it protect the saver, not punish them. Because in the end, a nation that taxes its people’s hope is a nation that risks losing it altogether.