BIR releases new withholding tax table
The effect of lower personal income tax rates in light of the recently-approved Tax Reform for Acceleration and Inclusion (TRAIN) law may already be felt in the first payday of 2018.
To ensure a "smooth transition" to a new withholding tax rates, the Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular 105-2017 or the revised withholding tax table on compensation.
"Thus, beginning January 1, 2018, every employer making compensation payments to their respective employees shall deduct and withhold from such compensation a tax determined in accordance with the revised withholding tax table," the circular read.
There will be zero withholding tax for the first P20,833 of the monthly compensation of employees, according to Sandra Aguinaldo's report on GMA News' State of the Nation on Tuesday.
For those earning above the P20,833-compensation level, the BIR showed how the new withholding tax rates shall apply.
"'Yung first P21,000 ng ating suweldo ay walang tax so makikinabang tayong lahat... 'Yung mga minimum earners dati nang walang tax. Mas mararamdaman siya ng above minimum, middle income earners na dating nakakaltasan ng 32 percent tax, mas mababa ang tax," Mon Abrea, tax expert and founding president of Asian Consulting Group, said.
As compensating measures due to potential revenue losses due to lower personal income tax rates, the TRAIN law also adjust excise taxes on petroleum products, automobiles, and sugar sweetened beverages.
With this, Abrea advised consumers to be wiser in their expenses as the adjusted excise tax will have inflationary pressures.
"Ang outright impact nito agad ay sa softdrinks... dapat umiwas ka para hindi mabawasan ang budget mo. Sa basic commodities in general dahil tumaas ang fuel cost kaya dapat bantayan ang prices para hindi magsamantala ang iba. Hindi ko ina-advice na bumili ka ng sasakyan kung hindi mo kailangan kasi doble ang tax," Abrea said.
Abrea added that the additional take home pay resulting from the new income tax rates, should be invested in various tools such as the stock market or insurance.
"Additional income will invest sa stock market at sa insurance para lumago," Abrea said. —Ted Cordero/NB, GMA News