Workers’ fuel excise, VAT far outweighed by savings from tax reform, DoF says
THE adjusted fuel excise tax and additional VAT that would be implemented with the proposed personal income tax (PIT) reform package of the Department of Finance (DoF) would cost more than P4,000 in tax annually to wage earners with a P21,000 monthly income.
The PIT reform program, submitted by the DoF to the House of Representatives last month, seeks to modify the current personal income tax brackets, expand the value-added tax ( VAT) base and adjust the fuel excise tax rate.
A recent statement by the DoF showed that the additional VAT to be paid by a taxpayer earning a P21,000 monthly salary would amount to P3,096 annually.
The adjusted excise fuel tax, assuming that the taxpayer takes their own vehicle to work, would impose an additional P1,552 annually.
“This is because under the new DoF-proposed system, those earning P250,000 but not over P400,000 will only have to pay 20% of the amount in excess of P250,000 as personal income tax in the first year of implementation,” said DoF Chief Economist Karl Kendrick T. Chua.
The annual income tax to be paid by the example taxpayer would be reduced to P1,567 from the P34,209 paid under the current tax regime.
Employees who fall under Salary Grades 11 and below fall under the tax bracket that would exempt them from paying personal income tax, or those with an annual income of P250,000 and below.
Entry-level public school teachers and blue-collar workers are among the examples cited by the DoF statement as employees who would fall under this tax bracket.
Employees belonging to Salary Grades 12 to 17 would fall under the same bracket as the example given in the statement, those earning between P250,000 and P400,000 annual income.
The third tax bracket applies to those who fall under Salary Grades 18 to 25, or those who earn between P400,000 to P800,000 annually.
High-ranking government officials, such as directors, secretaries, undersecretaries and the VicePresident fall under the fourth tax bracket, government employees under Salary Grades 26 to 32, or those who annually earn between P800,000 and P2 million.
The President, who falls under Salary Grade 33, would fall under the fifth tax bracket, or individuals earning between P2 million and P5 million.
The sixth tax bracket, which imposes the highest tax rate of 35%, would be imposed on the “ultra- rich,” or those earning more than P5 million annually.
The DoF expects its PIT reform proposal to be passed in 2017, and imposable by 2018. —