Read on to learn more about the new Tax Reform for Acceleration and Inclusion or TRAIN law, and what it means for your daily budget.
You've probably heard about the new Tax Reform for Acceleration and Inclusion, or TRAIN law, on the news. But do you really know how it affects you? It's important for moms and dads to know more about this new law. It has a direct impact on the family budget.
What is the TRAIN law?
The Tax Reform for Acceleration and Inclusion is a law that makes significant changes to our current tax system.
One of the most popular parts of the TRAIN law is that it lowers the personal income tax for many taxpayers.
Under the new system, any individual with a total taxable annual income of 250,000 pesos or lower no longer needs to pay any income tax. For people who earn more than 250,000 annually, they will be taxed in excess of 250,000 pesos.
Estate tax was also lowered from 5-32% down to a flat rate of 6%. The donor's tax was also lowered to a rate of 6%.
TRAIN lowered certain taxes but increased others
However, the new law wasn't made just to lower the taxes. A caveat of the new tax system is that while some taxes were lowered, other taxes were increased.
Under the new system, interest rates coming from foreign currency deposits, such as those from OFW's, will be doubled from 7.5% to 15%.
Any winnings from the PCSO, which used to be tax-free, are now subject to a 20% tax if it's more than 10,000 pesos.
Taxes on gas and petroleum products will also increase under the new law, a measure which was met with an uproar online.
Another controversial change is the new tax on sweetened beverages. It imposes a higher tax on beverages that have sweeteners to six pesos per liter, and beverages that use high fructose corn syrup will have a tax of 12 pesos per liter.
These changes have been a source of concern – especially for parents – since it can cause an increase in the price of basic commodities. As a result of gas prices going up, the price of almost all goods would increase. The beverage tax would also cause juices, iced teas, and soft drinks to increase in price.
However, this is all speculation at this point. Though a price increase is likely, we still have yet to see the impact of the new tax system on basic commodities. This is why it's important to be smart about your family's expenses now more than ever.