Call center agents to save at least P28K under DOF tax reform plan

Call center agents and other workers with a monthly income of at least P21,ooo and with no dependents will save at least P28,000 a year under the proposed tax reform plan submitted by the Department of Finance (DOF) to the Congress.

Finance Undersecretary Karl Kendrick Chua said call center agents will be able to save this amount because under the DOF tax reform plan, they would have to shell out only a very small fraction of the personal income tax (PIT) they are now paying under the current system.

Under the existing tax rates, call center agents earning P21,000 a month still have to pay P34,209 in PIT, even if they file for a personal exemption of P50,000 and even with their 13th month pay and other benefits exempted from taxes.

But under the DOF tax plan, they would only pay P1,567 in PIT even if their 13th month pay and other benefits are factored-in when computing their net taxable income.

“This is because under the new DOF-proposed system, those earning P250,000 but not over P400,000 will only have to pay 20 percent of the amount in excess of P250,000 as personal income tax in the first year of implementation,” Chua, who is the DOF’s concurrent chief economist, said.

The DOF tax plan also includes a proposal to adjust the fuel excise tax, which has not been done since 1997, and expand the value-added tax (VAT) base to plug massive leakages.

Taking into account the additional VAT that they would pay annually for goods and services, which is about P3,096, and the effect of a fuel excise tax adjustments on their expenses, which the DOF estimates at P1,522, their net savings would amount to P28,024.

Assuming that he or she commutes to work, the savings would also include an indirect subsidy of P1,500 because the impact on transport fares would only be minimal as a result of the cash cards that would be given to drivers and operators of public utility vehicles to offset the increase in fuel excise.

Factoring in the additional P1,500 indirect assistance brings the net savings to P29,524 a year.

Based on 2013 data from the Bureau of Internal Revenue, a total of 447,181 individual taxpayers earning more than 250,000 but not over P400,000 would pay lower PIT under the DOF-proposed Tax Reform for Acceleration and Inclusion Act, which was submitted to both chambers of the Congress last Sept. 26.

Thus, the highest tax that one would pay under this bracket is P30,000 a year, which is already the level for an individual earning at least P30,000 a month.

In the government service, the P250,000-P400,000 bracket includes employees with the ranks of Teacher II, Teacher III, Cashier II, Geologist II, Attorney I, and Information System Res III. They belong to Salary Grades 12 to 17.

Individuals belonging to the lowest bracket—those earning not over P250,000 a year—would be exempted from paying taxes.

Some 3 million taxpayers paying the personal income tax under the current system would join the country’s 1.7 million minimum wage earners who are already exempted from paying the PIT, if the DOF-proposed tax reform plan pushes through.

This means that a total of 4.7 million taxpayers will no longer pay personal income taxes under the DOF tax plan.

Among these beneficiaries who will pay zero income tax under the DOF plan are utility workers, messengers, clerks, drivers, carpenters, laboratory technicians, computer operators, engineering assistants, electricians, legal assistants, and entry-level teachers in the government service. They belong to Salary Grades 11 and below.

For those with a net taxable income of P400,000 but not over P800,000, the highest tax that they would pay under the new DOF tax reform plan is P130,000, compared to the current system where they are now shelling out a maximum of P221,000 for PIT.

This bracket consisting of 357,875 taxpayers representing 4 percent of the total tax base for individuals, includes government workers under Salary Grades 18 to 25.

These cover employees with the ranks of Economist III, IT Officer, Board Secretary III, Attorney III, Assistant Division Chief, Court Attorney II, Division Chief and Director I.

For individuals with net taxable income of P800,000 but not exceeding P2 million, which covers 114,856 individuals or 3 percent of the tax base, the maximum PIT paid under this bracket would only be paying P490,000 in the first year of implementation, compared to P605,000 under the current system.

Salary Grades 26 to 32 in the government service are covered under this bracket, which includes those with the ranks of Director II, Director III, Bureau Director, the Assistant Secretaries, Undersecretaries and Secretaries of the Cabinet, and the Vice President.

Some 28,000 individuals earning P2 million to P5 million, representing 1 percent of the tax base would be taxed P490,000 plus 32 percent of their annual gross income in excess of P2 million.

The maximum PIT under this bracket is P1,450,000 compared to the current system where one has to cough up P1,565,000 for earning P5 million a year.

The President, under Salary Grade 33, is already included in this bracket.

The last bracket of ultra-rich taxpayers comprising less than 6,000 individuals earning over P5 million would have to pay a tax of P1.45 million plus 35 percent of the amount in excess of P5 million.

According to Finance Secretary Carlos Dominguez III, reducing the PIT rate would be done over a two-year period benefiting most taxpayers except the “ultra-rich.”

Dominguez said the general rule behind the Duterte administration’s income tax reform plan is for the rich to pay more and for the poor and low-income Filipinos to pay less or none at all.

“Without reforming our tax system so that it becomes fairer, simpler and more efficient, government cannot undertake the volume of spending required in achieving our goals” of reducing poverty from 26% to 17% in six years and elevating the Philippines to the status of a high-income country in one generation,” Dominguez said