MikeLigalig.com

ON SCALING DOWN THE PERSONAL INCOME TAX RATES

Scaling down the personal income tax rates will give direct and immediate relief to the roughly 800,000 government employees in the education sector.

That 800,000 includes 763,000 public school teachers nationwide, add to that the thousands more who are teaching and non-teaching personnel in the country's state universities, colleges and technical training centers, plus the many employees of the Commission on Higher Education, Technical Education and Skills Development Authority, and colleges and universities run by local government units.

By the Department of Finance's own computations, a public school teacher holding a Teacher II plantilla item could stand to gain annual "tax savings of P18,011" during the first full year of implementation of the Comprehensive Tax Reform Package.

The DOF also points out that an administrative employee with a Clerk IV item could have annual "tax savings of P7,282" when CTRP takes full effect.

Many government employees have annual income at P250,000 or lower and at this income bracket, the proposed new tax rate is zero. Note though that our country follows the gross household income approach in personal income taxation.

Some teachers have spouses who are also teachers or armed services personnel, or some other type of government employee.  Other teachers' spouses work in the private sector, or are engaged in business.

So if the combined household income exceeds P250,000, the first P250,000 is tax exempt and that is still significant tax relief.
I am concerned though about one set of computations of the Finance Department.

The DOF is assuming that the proposed tax schedule, if enacted into law later this year, would apply only to the "second half of 2017."

On this point, the Supreme Court made it very clear in a recent decision that new tax rates or exemptions will apply for the whole tax year and STARTING the year the law first takes effect.

Therefore, when Congress and President Duterte make the new tax rates happen this year as expected, computations of the new withholding taxes should factor in the deductions based on the new rates for the whole year and not just for the second half of 2017.

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