More take-home pay ahead!
Yesterday, six days before Christmas, Philippine President Rodrigo Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) measure, the first package in the government’s tax reform initiative, and called it a “Christmas gift” to Filipinos.
“This is the administration’s biggest Christmas gift to the Filipino people as 99 percent of the taxpayers will benefit from the simpler, fairer and more efficient tax system,” Duterte said, using language similar to that currently being employed by Donald Trump as he sells his own tax cuts in the US.
The biggest change is that now, the tax rate will differ depending on how much a person earns. In the past, the income tax rate was at 32 percent no matter what a person’s annual income is.
Here’s a breakdown of the specific changes:
PHP250,000 (US$4,968.94) or less annual income: no income tax
Over PHP250,000 (US$4,968.94) but not over PHP400,000 (US$7,950.71) annual income: 20 percent of earnings in excess of PHP 250,000 (US$4,968.94)
Over PHP400,000 (US$7,950.71) but not over PHP800,000 (US$15,901.43): PHP30,000 (US$596.341) + 25 percent of excess of PHP400,000 (US$7,950.71)
Over PHP800,000 (US$15,901.43) but not over PHP2 million (US$39,756.56): PHP130,000 (US$2,584.18) + 30 percent of excess of PHP800,000 (US$15,901.43)
Over PHP2 million (US$39,756.56) but not over PHP8 million (US$159,028.76): PHP490,000 (US$9,740.51) + 32 percent of excess of PHP2 million (US$39,755.38)
Over PHP8 million (US$159,028.76): PHP2.41 million (US$47,907.77) + 35 percent of excess of PHP8 million (US$159,028.76)
These tax rates will be lowered further in 2023 but the changes will only apply to income earned starting January 2018.
The mandatory “13th month” Christmas bonus and other bonuses will also only be taxed in excess of PHP90,000 (US$1,789.06) instead of the previous PHP82,000 (US$1,630.03).
With a lower income tax rate though, comes higher taxes on fuel consumption.
Starting next year, diesel, which is currently not taxed, will be taxed PHP2.50 per liter. LPG will be taxed PHP1 per liter and gasoline PHP7, an almost PHP3 increase.
These fuel tax rates are due to increase by 2019.
Cars, coal, and sugar-sweetened drinks will also be taxed at higher rates.
These changes mean that although people’s take-home pay will be higher, prices for everyday items will increase.
According to Duterte, revenues from the TRAIN will be used for priority projects like the administration’s “Build, Build, Build” infrastructure initiative, free tuition in state universities and colleges, and the rehabilitation of Marawi City.
Need an easier way to estimate your monthly income taxes next month? Check out this TRAIN tax calculator from ABS-CBN News.
