While individual taxpayers will get income tax breaks for the first P250,000 of their taxable income, the country’s 10 million poorest households will each receive almost P10,000 spread over the next three years, starting 2018 in unconditional cash transfers (UCTs) to help them cope with the minimal impact of the tax reform law on inflation, according to the Department of Finance (DoF).
Finance Secretary Carlos Dominguez, in a statement on Friday, said the overhaul of the country’s outdated tax system to make it simpler, fairer and more efficient via the Tax Reform for Acceleration and Inclusion Act (Train) Law starting this year along with the funding support for education and infrastructure modernization are among the biggest achievements of President Rodrigo Duterte in 2017.
Among the TRAIN Law’s key provisions is the earmarking of up to 30 percent of the incremental revenues to be raised from this law for social services, which include UCTs of P200 a month (or P2,400 per year) for the country’s 10 million poorest households for 2018, which will increase to P300 a month (or P3,600 per year) in 2019 and 2020, or a total of P9,600 in cash subsidies for each household over this three-year period.
“The big part of the budget of course is the Department of Education, [which is the priority of the President]. This is part of our investment in infrastructure. [The most important is the] infrastructure of the mind of our youth, so we really have to spend a lot on that and he has also passed the law providing free college education,” Dominguez said.
The Finance chief added that the government’s “Build, Build, Build” infrastructure program will also create more livelihood and employment opportunities for the youth.
The Train Law, which took effect on January 1, will exempt compensation earners and self-employed individuals with an annual taxable income of P250,000 and below or those earning at least P21,000 a month from paying the personal income tax (PIT).
The 13th month pay and other bonuses amounting to P90,000 are also tax-exempt.
For those earning P250,000 and above, the tax brackets have also been adjusted so that those with taxable incomes of more than P250,00 each but not above P2 million will pay only between 20 and 30 percent PIT.
Those earning P2 million annually but not above P8 million are taxed 32 percent. |
A hefty tax of 35 percent are reserved for those earning P8 million and above.
Starting 2023, the brackets will be adjusted further so that those with taxable income of more than P250,00 but not above P2 million are taxed between 15 percent and 25 percent.
Those earning P2 million annually but not above P5 million will be taxed 30 percent by 2023, while those earning above P8 million will be paying 35 percent PIT.
The law will offset the revenue-eroding PIT cuts with revenue-enhancing measures such as broadening the value-added tax (VAT) base; adjusting excise taxes on fuels, automobiles and alcohol and tobacco products; and introducing a tax on sugar-sweetened beverages with exemptions.
Dominguez said one major benefit of the infrastucture build-up is the distribution of wealth to the countryside as farmers and other rural workers would eventually be able to transport their goods at lower costs and widen their access to markets.
People in urban centers, in turn, will get to enjoy lower prices of basic goods because of the reduced costs of transporting and distributing them, he added.