Train law expected to raise workers’ take-home pay

ORDINARY Filipino workers will increase their take home income this New Year due to a lower personal income tax (PIT) under the Tax Reform for Acceleration and Inclusion, or “TRAIN,” law (Republic Act 10963), the chairman of the House Committee on Ways and Means said.

“A 13.5-month bonus” is how Rep. Joey Sarte Salceda describes the cuts to the personal income tax rates effective this year.

“The Train Law PIT cut will be equivalent to around 5 percent in gross income in added take home pay,” Salceda said. “That’s around half a month’s worth of additional disposable income.”

The new annual income tax rates will reduce taxes by around 5 percent for those earning between P250,000 and P2 million. Individuals with taxable income above P2 million but not greater than P8 million will see a 2 percent decrease in personal income tax. Income below P250,000 will still be exempt from PIT.

“It will increase disposable income for Filipino families by around P32 billion by our emerging estimates. That will boost consumer spending and also leave some room for savings for home ownership,” Salceda added.

According to the lawmaker, the cut will also cushion workers from the impact of the 1 percentage point increase in SSS contributions and the 0.5 percentage point increase in Philhealth premiums.

“Take home is still up 3.5 percentage points more or less,” Salceda said.

US-PH tax treaty

SALCEDA also said that freelancers with US employers can benefit from the reduced personal income tax rates under the TRAIN Law if the Us-philippine Income Tax Convention can be implemented with an automatic exchange of information mechanism. “The TRAIN Law will massively benefit Us-employed Pinoy freelancers, if the rates can be implemented,” he said. The US implements a 30 percent withholding tax on income derived from the US by foreign citizens abroad. This, Salceda explains, includes online inf luencers working through US companies such as Youtube Inc.

“From 30 percent, their taxes go down to around 15 percent if the Philippines’ reduced rates are imposed on them instead. That’s a two-month bonus,” the lawmaker explained.

Salceda added that the Philippine Senate needs to ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MCMA AT) so that tax authorities of the US and the Philippines can implement the tax treaty better, allowing both countries to impose the proper rates on their nationals.

He said he hopes the Senate realizes this “and finally ratifies the convention in the ninth year since we signed it.”