FridayOL

Malacañang Palace has reassured the public that the 20% tax on interest income from bank deposits is not a new imposition, but rather a long-standing policy that has been in effect since 1998. This clarification comes amidst growing confusion and anxiety surrounding the recent adjustments to tax rates on savings interest.

In a statement released on Friday, the Palace emphasized that the 20% tax has been consistently applied to interest income exceeding a certain threshold. This policy was initially introduced to broaden the tax base and generate additional revenue for the government, particularly from those with substantial savings.

“There is no need to worry,” a Palace official stated. “The 20% tax on interest has been in place for over two decades. The recent discussions have simply focused on adjustments to the thresholds and rates for other types of income, not the 20% tax on interest itself.”

Understanding the Existing Tax System

For those unfamiliar with the specifics, here's a breakdown of how the tax on interest income works:

• Taxable Interest Income: Interest earned from bank deposits, savings accounts, and other investment vehicles is generally considered taxable income.
• 20% Final Withholding Tax: A 20% final withholding tax is applied to interest income above a certain threshold. This means that the tax is deducted directly from the interest earned before it is credited to your account, and it's considered the final tax due on that income.
• Thresholds and Rates: The specific thresholds and rates have been adjusted periodically over the years. It is important to consult with a tax professional or the Bureau of Internal Revenue (BIR) for the most up-to-date information.

Addressing Misconceptions

The Palace's clarification aims to dispel the widespread misconceptions that the 20% tax is a new imposition. The recent debates surrounding the new tax rates on passive income, such as dividends and royalties, have inadvertently caused confusion regarding the existing tax on interest.

The government acknowledges the concerns of the public and is committed to providing clear and accurate information regarding tax policies. The Palace encourages Filipinos to consult official sources, such as the BIR website and publications, to ensure they have a comprehensive understanding of their tax obligations.

Why the Tax Exists

The rationale behind the 20% tax on interest income is rooted in the principle of equitable taxation. It aims to ensure that individuals with significant savings contribute their fair share to the government's revenue. The revenue generated from this tax is used to fund essential public services, such as education, healthcare, and infrastructure development.

Staying Informed

To remain informed about changes in tax laws and regulations, it is advisable to regularly check the BIR website (www.bir.gov.ph) and consult with a qualified tax advisor. Understanding your tax obligations is crucial for maintaining financial stability and avoiding potential penalties.