The Department of Finance has just released more info on proposed tax reform proposals it aims to be approved next year, and yes it includes much lower income tax rates. How much lower? How about as low as 1%? Have I got your attention?
But just who are qualified under this low income tax rate? Let’s assume JCRuz (aka Juan de la Cruz) is a starting triathlon coach who makes P30,000/month and as part of his work, racks up expenses of P9,000/month. JCruz is also single and currently dating his childhood crush. Under the current tax rules, the income tax for the year would be:
Annual income
30,000 x 12 360,000
Less allowed deductions:
Business expenses – 9,000 x 12 108,000
Personal tax exemption 50,000
Dating childhood crush x sorry, hindi pwede
Taxable income 202,000
Tax due (current rules) 38,000
Under the proposed lower income tax rates, those earning P250,000 and below will be taxed a fixed P2,500, and 20% on the next P150,000 of income over P250,000. So JCruz could see his P38,000 tax sliced to just:
Annual income 360,000
Less allowed deductions:
Business expenses 108,000
Personal tax exemption x let’s assume this could go away
Taxable income 252,000
Tax due 2,900
The lower rates should encourage more people to register and file their taxes and could lead to higher total tax collections to improve our country’s infrastructure and public services.
Isn’t this more awesome that catching that rare Pokémon?