Today, I found out that a lot of people are unaware that the interest they earn from their savings account is taxed at 20 percent.
The internet is abuzz with disgruntled Filipinos talking about the Capital Markets Efficiency Promotion Act (CMEPA). Unfortunately, this has been fueled by the media itself framing this new law as a new tax that savers will have to pay.
While this law affects everyone that has been enjoying a lower tax rate (such as long term time deposit accounts) it is not true that there will be an increase in the tax rate on interest earned from regular savings accounts.
Some people even think that their savings will be reduced by 20 percent!
It's so sad because a lot of people are inclined to believe misinformation simply because of their politics.
This is what we have become.
The good news is there is now more awareness about the unfairness of savers getting taxed heavily.
Perhaps banks that do not display a breakdown of the interest earned and tax withheld will now be required to do so in order for people to be aware of the 20% tax. I checked my online bank accounts and it is only BPI that displays the interest earned and tax withheld amounts. The others like CIMB and Seabank just display the net interest earned.
I don't know why but the 20% tax is something that I have been aware of ever since I started working so I am very surprised that I have friends who are my age and who have had bank accounts for a very long time now that are unaware that the interest income from their savings accounts is getting taxed 20%.
A lot of people who thought that it was their savings that was going to be taxed at 20% threatened to remove their money from the bank.
What they do not realize is that this is something that they can no longer do in an all digital and cashless society.
In fact, negative interest rates will become a possibility once physical cash is gone. And yes, negative interest rates will be a tax on your principal and not just on the interest income earned.
So perhaps there is a divine reason for all this. Who knows, instead of raking in more money from this measure, the government might even be pressured to lower or scrap the tax on interest earned from savings. And perhaps people will realize the importance of physical cash.
Yes, this is why the accrued interest on our savings often doesn’t match the bank's published interest rate. Additionally, it's frustrating to incur a monthly dormant fee for accounts that haven't been accessed in five years.
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