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It’s the end of the year, which means that employees who receive a lot of bonuses (13th, 14th, or even 15th month) may need to pay extra taxes on top of the regular rate withheld by their employees. But why do we really need to pay taxes? What exemptions should we expect?

To answer these questions, I chat with Mr. Mon Abrea also known as The Tax Whiz of The Abrea Consulting Group.

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“Let’s just consider it as our contribution, not to our politicians, but to our government, so they can do their job, which is to provide public services.”

It’s our duty to pay our taxes, but it is also our responsibility to elect the right people into the government offices. “We should not settle for less because we are paying our taxes.”

If we don’t pay our taxes, the government will not be able to provide social services. How the government spends the taxes received is another issue, which means that we also need to demand accountability and transparency.

The Philippines has one of the highest personal income tax rates in the world. “Kapag tumaas ng ilang libo lang ang suweldo mo, ang laki na ng buwis mo. Pag umabot ka sa 500,000 (annually), in excess of that 32% na ang rate. Masyadong mabigat ito…. The [personal income] tax rate of 32% is even higher than the corporate tax rate, which is only 30%.”

Mr. Abrea’s personal proposal is to increase the bracket from 500,000 to 5 Million for the tax rate of 32% to kick in; and that the highest tax rate of 32% should be lowered to 25%.

“Mabigat ang pinapasan ng mga empleyado, considering na fixed income earner sila. Wala silang choice, withhold at source ang kanilang tax.”

Sen. Sonny Angara and Sen. Bam Aquino have filed bills to lower the income tax rates and widen the bracket so that people can get more for the income that they receive.

With a lower income tax rate, employees will have a bigger take home income, and that will enable them to engage in more activities that will stimulate and help the economy grow.

You will know that by the start of next year (January or February). If your HR company withheld more taxes than what you need to pay for, then you’ll receive tax refund.

Tax-free bonus: up to PhP30,000 only.

There’s another bill in Congress that seeks to increase this tax exemption bonuses to P70,000. It has passed the third reading, but will probably take effect by next year.

No more distinction for single, married, or whatever. All employees have exemption of P50,000.00 apart from the P30,000 bonus exemption. For those with children, you can claim up to 4 children at PhP 25,000 exemption for each child.

Every employee can expect a personal exemption of P50,000 plus the tax-free bonus exemption of P30,000. If you have a child, you can have another exemption of P25,000.

If you are an employee, but you have another source of income, you’ll be considered as a Mix Income earner and you’ll need to register and declare your other sources of income for taxation purposes. But the problem is, the tax registration and collection system of the BIR is not yet simplified for this purpose. The BIR tax compliance regulations need to simplify the tax filing processes.

The BIR should provide a way for online professionals to register and file taxes as easily and as smoothly as possible. The BIR also needs to provide a more nuanced classification of taxpayers (i.e. micro or small businesses, freelancers, compared with the large corporations who are making big money).

Abrea Consulting Group aims to help micro and small businesses to comply with BIR regulations.

CSR Philippines – Think tank for tax policies of some Senators. Simplify and encourage taxpayers to pay the right taxes.

Mr. Mon Abrea’s book: Got a question about taxes #AsktheTaxWhiz available from major bookstores nationwide.

Facebook – Mon Abrea Ask the Tax Whiz

Twitter: https://twitter.com/AsktheTaxWhiz

Office number: (02) 622-7720

Focus Group Discussions every Friday at the Abrea Consulting Group Office

For Mentoring Sessions, send an email to consult@acg.ph

Rappler column: every Tuesday #AsktheTaxWhiz

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