If you’re earning more than P5 million every year, it’s safe to say—and this is putting it mildly—that you’re filthy rich.
While the level of satisfaction of earning a seven-digit paycheck may just be a pipe dream of most Filipinos, they also have to deal with problems only people like them can afford.
Only this time, it is the government they have to answer to, thanks to the new tax rate proposed for the “ultra rich.”
According to Finance Undersecretary Antonette Tionko, the modified tax bracketing system aims to improve the current tax system that the government is using to collect revenue from the public.
Under the new tax system, individuals who are earning P5 million and up will be billed by the government under the 35% bracket, on top of the P1,452,500 fixed income tax imposed on them annually.
Meanwhile, Tionko said that people earning between P2 million and P5 million will be still be placed in the 32% bracket.
With the new tax policy reform being prepared by the DOF, the agency hopes to create a simpler and more comprehensive income tax system and slowly reduce the maximum income tax rate from 32% to 25%, except for the highest-income earners.
According to Tionko, there are less than 1,000 Filipinos who can be classified the “ultra rich” category.
To have a better idea on how the Duterte administration plans to recalibrate the new income tax tiers, here are the proposed six income brackets:
- Those earning zero to P250,000 a year will get a P2,500 deduction in income tax.
- Over P250,000 to P400,000, tax of P2,500 plus 20% of the amount in excess of P250,000.
- Over P400,000 to P800,000, tax of P32,500 plus 25% of the amount in excess of P400,000.
- Over P800,000 to P2 million, tax of P132,500 plus 30% of the amount in excess of P800,000.
- Over P2 million to P5 million, tax of P492,500 plus 32% of the amount in excess of P2 million.
- Over P5 million, tax of P1,452,500 plus 35 percent of the amount in excess of P5 million.
With this new system, the government expects lower revenue from income tax.
To compensate for the deficit, the national budget will sustain, the government plans to impose new taxes on sugar-sweetened drinks, gasoline, luxury goods, and junk food to name a few.
In addition, the Duterte administration bared that one of its priority bills is to adjust the sin taxes levied on alcohol and tobacco. Finally, the government wants stricter measures to eliminate tax evaders as well as money launderers.