WHILE the Duterte adminis-tration is seriously consi-dering the proposal to lower personal income-tax (PIT) rates, the public should also be prepared to face its consequences as the government is also planning to impose additional taxes on several commodities.
Under the Department of Finance (DOF) working draft bill on lowering PIT, seen being authored by Speaker Pantaleon D. Alvarez, the tax shall be computed in accordance with and at the rates established in two schedules. For 2018, the new tax brackets are:
■those earning not over P250,000 will pay a fixed tax rate of P500;
■ those earning over P250,000, but not over P400,000, would pay a fixed tax of P500 with an additional 20 percent of the excess over P250,000;
■ those earning over P400,000, but not over P800,000, would pay a fixed tax of P30,500, with an additional 25 percent of the excess over P400,000;
■ those earning over P800,000, but not over P2 million, would pay an excess tax of P130,500, with an additional 30 percent of the excess over P800,000;
■ those earning over P2 million, but not over P5 million, would pay a fixed tax of P490,500, with an additional 32 percent of the excess over P2 million; and
■ those earning over P5 million, would pay a fixed tax of P1,450,500, with an additional 35 percent of the excess over P5 million.
For 2019, the new tax brackets are:
■those earning not over P250,000, will pay a fixed tax rate of P500;
■ those earning over P250,000, but not over P400,000, would pay a fixed tax of P500, with an additional 15 percent of the excess over P250,000;
■ those earning over P400,000, but not over P800,000, would pay a fixed tax of P23,000, with an additional 20 percent of the excess over P400,000;
■ those earning over P800,000, but not over P2 million, would pay an excess tax of P103,000, with an additional 25 percent of the excess over P800,000;
■ those earning over P2 million, but not over P5 million, would pay a fixed tax of P403,000, with an additional 30 percent of the excess over P2 million; and
■ those earning over P5 million would pay a fixed tax of P1,303,000, with an additional 35 percent of the excess over P5 million.
In the current setup, those earning P10,000 or less per month pay 5-percent income tax, while those with yearly earnings of P500,000 and above pay 32-percent income tax.
The draft proposal also provides that not later than five years after the effectivity of this act and every five years thereafter, the above taxable income levels and base tax in the above schedules shall be adjusted through rules and regulations issued by the secretary of finance after considering, among others, the effect on inflation.
The measure also said a final tax of 32 percent effective January 1, 2018, (from 34 percent in 1998); 30 percent effective January 1, 2019, (from 33 percent in 1999 and 32 percent in 2000) is imposed on the grossed-up monetary value of fringe benefits furnished or granted to the employee (except rank and file employees as defined herein) by the employer, whether an individual or a corporation (unless the fringe benefit is required by the nature of, or necessary to the trade, business or profession of the employer, or when the fringe benefit is for the convenience or advantage of the employer).
The bill also said the grossed-up monetary value of the fringe benefit shall be determined by dividing the actual monetary value of the fringe benefit by 68 percent effective January 1, 2018, (from 66 percent in 1998); 70 percent effective January 1, 2019, (from 67 percent in 1999 and 68 percent in 2000) and thereafter.
“Fringe benefits” pertain to any good, service or other benefit furnished or granted in cash or in kind by an employer to an individual employee (except rank and file employees as defined herein) such as, but not limited to, housing; expense account; vehicle of any kind; household personnel, such as maid, driver and others; interest on loan at less than market rate to the extent of the difference between the market rate and actual rate granted; membership fees, dues and other expenses borne by the employer for the employee in social and athletic clubs or other similar organizations; expenses for foreign travel; holiday and vacation expenses; educational assistance to the employee or his or her dependents; and life or health insurance and other nonlife-insurance premiums or similar amounts in excess of what the law allows.
The measure will amend Sections 24, 31, 32, 34, 35, 79, 106, 107, 108, 109, 110, 148 and Title VI of the RA 8424 of the National Internal Revenue Code, as amended.
Offsetting measures
Meanwhile, the draft bill will impose higher taxes on petroleum products, sugar products, alcohol and tobacco products and eliminate certain exemptions from value-added tax to make up for the estimated P179 billion in foregone revenues from the planned tax cuts.
Under the bill, effective January 1, 2017, excise tax will be imposed on:
■ lubricating oils and greases, including, but not limited to, base stock for lube oils and greases, high vacuum distillates, aromatic extracts, and other similar preparations, and additives for lubricating oils and greases, whether such additives are petroleum based, per liter and kilogram, respectively, of volume capacity or weight, P10 (from P4.50);
■ processed gas, per liter of volume capacity, P6 (from P0.05);
■ waxes and petrolatum, per kilogram, P10 (from P3.50);
■ on denatured alcohol to be used for motive power, per liter of volume capacity, P6 (from P0.05):
■ naphtha, regular gasoline and other similar products of distillation, per liter of volume capacity, P10 (from P4.35).
■ leaded premium gasoline, per liter of volume capacity, P10 (from P5.35);
■ unleaded premium gasoline, per liter of volume capacity, P10 (from P4.35);
■ aviation turbo jet fuel, per liter of volume capacity, P10 (from P3.67);
■ kerosene, per liter of volume capacity, P6 (from P0.00);
■ diesel fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, P6 (from P0.00);
■ liquefied petroleum gas, per liter, P6 (from P0.00);
■ asphalts, per kilogram, P6 (from P0.56); and
■ bunker fuel oil, and on similar fuel oils having more or less the same generating power, per liter of volume capacity, P6 (from P0.00).
The draft bill also said the tax rates shall be increased by 10 percent every year thereafter, effective January 1, 2018, through revenue regulations issued by the secretary of finance.
The draft bill also said there shall be levied, assessed and collected on sugar sweetened beverages (SSBs) per liter of volume capacity, an excise tax of P10 upon removal from the manufacturer’s plant or upon importation.
It also said the rate of tax imposed will be increased by 10 percent every year thereafter effective on January 1, 2018, through revenue regulations issued by the secretary of finance.
Under the bill, the SSBs, which shall mean nonalcoholic beverages that contain caloric sweetener, include:
■ soft drinks: nonalcoholic, flavored carbonated or noncarbonated beverages;
■ Soda, pop, soda pop: same as soft drinks;
■ fruit drinks, punches or ades: sweetened beverages of diluted fruit juice;
■ sports drinks: beverages designed to help athletes rehydrate, as well as replenish electrolytes, sugar and other nutrients;
■ sweetened tea and coffee drinks: teas and coffees to which caloric and noncaloric sweeteners have been added;
■ energy drinks: most energy drinks are carbonated drinks that contain large amounts of caffeine, sugar and other ingredients, such as vitamins, amino acids and herbal stimulants;
■ all nonalcoholic beverages that are ready-to-drink and in powder from with natural or artificial sugar; and
■ all nonalcoholic beverages with added artificial sugar sweeteners
“Sugar sweetened beverages, which are blended and sold at establishment, such as coffee shops, cafeteria and restaurants, shall be taxed on the syrup or sugar-added used and shall subject to the rate of P10-per-liter excise tax,” the draft bill said.
Products excluded from the excise tax on SSBs are 100-percent natural fruit juices; vegetable juices; yoghurt and fruit flavored yoghurt beverages with pure fruit and vegetable juice or concentrate; meal replacement beverages (medical food), as well as weight loss products; all milk products, infant formula and milk alternatives, such as soy milk or almond milk, including flavored milk, such as chocolate milk; and all other 100-percent natural fruit or vegetable drink with coconut sap, molasses or honey.