What's Tax Reform?

It's time to examine tax reforms and how it may help the Filipino in various ways. Note that this tax reform will increase the prices of certain items. Before you panic, let's get into the tax reform and how it's actually helpful to Filipinos. I may be no taxation expert but I take time to analyze the tax reforms to help spread the word about it.

Tax reduction 

So how this this going to help? I started to think about reducing personal income tax would be helpful. So I'm thinking about how personal income tax reduction will help people. In the past, having an income of PHP 500,000.00 and up means you have to pay a 32% plus excess if any. If you remember the old computation, it was like:

This was the old tax table. If you had an income of PHP 500,000 and above it meant paying PHP 125,000 and if you had excess, it was 32% of the excess of PHP 500,00.00. Let's say I have an income of PHP 700,000.00 so that means I would have to pay PHP 125,000.00 plus PHp 64,000.00 (32% of excess of PHP 500,000) which would be PHP 189,000.00 worth of tax.

But with the new system, any income that's PHP 250,000.00 and below will be exempt. Instead, those who will earn at least PHP 8,000,000 and above will start paying the 35% tax. I think taxing those people with PHP 8,000,000.00 and above at 35% is far more fair than taxing those with PHP 250,000 but below PHP 8,000,000 in income tax.

Here's the actual tax table. Doing a comparative computation of the old taxes would realize that there is a significant drop. An example is that of an income worth looking at would be:

For an income of PHP 400,00.00:

Old tax system = PHP 50,000.00 + (PHP 400,000.00 - PHP 250,000.00)(0.30) = PHP 95,000.00
New tax system = (PHP 400,000 - PHP 250,000)(0.20) = PHP 30,000.00
Added income after taxes of PHP 65,000.00 in the new tax system

For an income of PHP 800,000:

Old tax system = PHP 125,000.00 + (PHP 300,000 x 0.32) = PHP 221,000.00
New tax system = PHP 30,000.00 + (PHP 400,000 x 0.25) = PHP 130,000.00
Added net income after taxes of PHP 91,000.00 in the new tax system

For an income of PHP 2,000,000:

Old tax system = PHP 125,000 + (0.32 x PHP 1,500,000.00) = PHP 605,000.00
New tax system = PHP 130,000 + (0.32 x 1,200,000.00) = PHP 514,000.00
Added net income after taxes of PHP 91,000.00 in the new tax system

For an income of PHP 8,000,00.00:

Old tax system = PHP 125,000 +(0.32 x PHP 7,500,000.00) = PHP 2,525,000.00
New tax system = PHP 490,000 + (0.32 x PHP 6,000,000.00) = PHP 2,410,000.00
Added net income after taxes of PHP 115,000.00 in the new tax system

Let's take a look at the inheritance tax. Before, you had to pay 20% of the taxes but now it's reduced to 6% deduction. This would be a better reason to prepare last will and testament rather than dying inestate. If the whole estate's net value is taxed at only 6% then I think more people will be honest enough to declare the whole value of the estate. 

This is also the donor's tax or the deed of donation. Before, most people choose to donate some of their properties to their children or grandchildren (if they are of age to receive it) to avoid much complications before they die. Sometimes, the donation happens to give to both children and grandchildren simultaneously. In short, the grandparent may give his or her house to a child while other properties are directly given to the grandchildren at the same time. 

This time, it doesn't matter where you go. Whether you choose to donate or you choose to write your last will and testament - you will pay for the 6% net value. This gives people the option to choose which would be easier to process.

Not to mention, it's time to think about how Value Added Tax works. An increase of giving vat to anything of PHP 3,000,000 may mean prices may lower down for certain items. With this one in mind, leasing would also mean that all rentals worth PHP 15,000 and below will not get VAT. 

Taxes will increase the prices of the following

So how does this work to do some sugar tax? Do you know that many Filipinos really and badly need to cut down on sugar? A typical scenario is going to eat banana que or camote que fries which uses a lot of sugar and you're having soft drinks to drink down with it. It may be muscuvado a healthier form of sugar but you can't deny too much muscuvado is still bad for you. It will still give you diabetes or obesity if you take too much of it though I wouldn't add to much of it considering that it's sweeter than regular sugar so you don't need to add more. If the prices of soft drinks were increased per liter then think the prices of soft drinks will also increase. People will be forced or convinced to drink more clean water than soft drinks so they don't get too much sugar. 

I think adding 5% to cosmetic procedures will help discourage unnecessary modifications. There's a difference between medical surgery vs. cosmetic surgery. Cosmetic surgery is probably one of the biggest reasons why people don't age gracefully. It's a shame really how some some of the older women are prettier than the younger women. The secret is that certain beauty queens way past their prime age with grace while today's younger women age disgracefully with surgeries. 

So how does this increase of coal excise tax work? This would discourage the use of too much coal for manufacturing and may convince people to get renewable energy. Forget about Noynoy Aquino's arguments against the Marcos' wind power planet and solar power plant. I guess he wasn't listening well enough to his science teacher back in secondary school! 

How will petroleum excise tax work? You may start complaining about the prices of gasoline increasing. Yes, that's the downside of having these taxes with petroleum products. Here's what. Do you know how difficult it is to drill petroleum? Do you know how too much fuel consumption can lead to pollution? Do you know that low quality machines release so much pollution? This would probably make sure that machines that don't pass the emission test will have lesser chances of getting fuel. Talk about pollution control.

It's time to think about mining tax. Why the increase? Whether you like it or not that while mining is necessary it still requires you to be careful. There will be land clearing and a lot of destruction involved. Raising up the tax on mining may limit the amount of mining firms going into the Philippines to make sure safety precautions are done first.

Last, it's all about the tobacco excise tax. I think taxing cigarettes would be very good for the reason that smoking is dangerous to your health. I don't think the smoking ban is enough. Smoking should be minimized by taxing them higher from PHP 32.50 and above as the years increase. This way, less people will be tempted to smoke which would be very good. I guess some people who hate the TRAIN reform program want to keep smoking in public.

Source of information:

Nolisoli