PHILIPPINE

FISCAL POLICY
Chapter 5
FISCAL POLICY
• Measures to
stabilize the
economy by
manipulating the
levels and
allocation of taxes
and government
expenditures.
2
TAXATION
• Is the process by
which the
government
collects revenue in
order to pay for its
expenses.

3
REAL ESTATE INCOME
TAX TAX

SOURCES OF
TAX
VALUED- CAPITAL GAINS
ADDEDTAX TAX
(VAT)
4
INCOME TAX
• Tax on person’s income,
wages, and profits arising
from property, practice of
profession, conduct of
trade or business.
• Individual income tax is
progressive, meaning,
the tax rate increases as
the tax base increases.
5
 WHO ARE REQUIRED TO PAY
INCOME TAX?
SOURCE OF INCOME
TAXPAYER WITHIN WITHOUT

Resident citizen ✓ ✓
Non-resident ✓
citizen
Resident and ✓
non-resident
alien
Domestic ✓ ✓
corporation
Foreign ✓
corporation 6
GRADUATED TAX SCHEDULE

7
 COMPARATIVE TAX SCHEDULE
OLD LAW (2017 and prior) TRAIN LAW (2018 – 2022)
INCOME PER YEAR TAX RATE INCOME PER YEAR TAX RATE

P10,000 and below 5% P250,000 and below 0%

Proseware
Above P10,000 to P30,000 P500 + 10% of the excess over Above P250,000 to P400,000 20% of the excess over P250,000
P10,000

Above P30,000 to P70,000 P2,500 + 15% of the excess over Above P400,000 to P800,000 P30,000 + 25% of the excess over
P30,000 P400,000

Above P70,000 to P8,500 + 20% of the excess over Above P800,000 to P2,000,000 P130,000 + 30% of the excess over
P140,000 P70,000 P800,000

Above P140,000 to P22,500 + 25% of the excess over Above P2,000,000 to P8,000,000 P490,000 + 32% of the excess over
P250,000 P140,000 P2,000,000

Above P250,000 to P50,000 + 30% of the excess over Above P8,000,000 P2,410,000 + 35% of the excess over
P500,000 P250,000 P8,000,000

Above P500,000 P125,000 + 32% of the excess over

P500,000 8
Sample Problem – Compensation Income
TAXPAYER: SINGLE/MARRIED WITH OLD LAW (NIRC) TRAIN LAW
NO QUALIFIED DEPENDENT
Compensation Income P 360,000 P 360,000
13th month pay 30,000 30,000
Proseware
Total Compensation Income P 390,000 P 390,000
Less: 13th month pay 30,000 30,000
Personal Deductions 50,000 0
TOTAL TAXABLE INCOME P 310,000 P 360,000
TAX DUE (50,000 +30% in excess of 68,000 22,000
250,000)
LESS: TAX WITHHELD 68,000 22,000
(P5,666.67 x 12) (P1,833.33 x 12)

TOTAL TAX PAYABLE P 0 P 0 9

Sample Problem – Compensation Income
TAXPAYER: SINGLE/MARRIED WITH OLD LAW (NIRC) TRAIN LAW
QUALIFIED DEPENDENT OF 4
Compensation Income P 360,000 P 360,000
13th month pay 30,000 30,000
Proseware
Total Compensation Income P 390,000 P 390,000
Less: 13th month pay 30,000 30,000
Total Personal Deductions 100,000 0
TOTAL TAXABLE INCOME P 260,000 P 360,000
TAX DUE (50,000 +30% in excess of 53,000 22,000
(20% in excess of 250,000)
250,000)
LESS: TAX WITHHELD 40,000 22,000
(P3,333.25 x 12) (P1,833.33 x 12)

TOTAL TAX PAYABLE P 13,000 P 0 10

11
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000
excess @ 30% 63,330
TOTAL P 113,330

Less: Quarterly payments 65,000

TAX PAYABLE P 48,330
12
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000 TAX DUE: first 400K
excess @ 30% 63,330 Excess @ 25%
TOTAL P 113,330

Less: Quarterly payments 65,000

TAX PAYABLE P 48,330
13
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000 TAX DUE: first 400K P 30,000
excess @ 30% 63,330 Excess @ 25%
TOTAL P 113,330

Less: Quarterly payments 65,000

TAX PAYABLE P 48,330
14
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000 TAX DUE: first 400K P 30,000
excess @ 30% 63,330 Excess @ 25% 15,275
TOTAL P 113,330

Less: Quarterly payments 65,000

TAX PAYABLE P 48,330
15
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000 TAX DUE: first 400K P 30,000
excess @ 30% 63,330 Excess @ 25% 15,275
TOTAL P 113,330 P 45,275
Less: Quarterly payments 65,000
TAX PAYABLE P 48,330
16
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000 TAX DUE: first 400K P 30,000
excess @ 30% 63,330 Excess @ 25% 15,275
TOTAL P 113,330 P 45,275
10,833.33 + 30%(115,275-66,667)
Less: Quarterly payments 65,000 25,416
TAX PAYABLE P 48,330
17
Sample Problem – Income from Business or Profession
• USING ITEMIZED DEDUCTIONS
OLD LAW TRAIN LAW
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000) ( 580,000)
Proseware
Gross Profit P 870,000 P 870,000
Operating Expenses (408,900) (408,900)
Net Taxable Income P 461,100 P 461,100
TAX DUE : first 250,000 P 50,000 TAX DUE: first 400K P 30,000
excess @ 30% 63,330 Excess @ 25% 15,275
TOTAL P 113,330 P 45,275
10,833.33 + 30%(115,275-66,667)
Less: Quarterly payments 65,000 25,416
TAX PAYABLE P 48,330 P 19,859
18
Sample Problem – Income from Business or Profession
• ITEMIZED vs. OPTIONAL STANDARDS DEDUCTION, 40%)
ITEMIZED DEDUCTIONS TOTAL
Sales P 1,450,000
Cost of Goods Sold ( 580,000)
Proseware
Gross Profit P 870,000
Operating Expenses (408,900)
Net Taxable Income P 461,100
TAX DUE: first 400K P 30,000
Excess @ 25% 15,275
TOTAL P 45,275
Less: Quarterly payments 25,416
TAX PAYABLE P 19,859
19
Sample Problem – Income from Business or Profession
• ITEMIZED vs. OPTIONAL STANDARDS DEDUCTION, 40%)
ITEMIZED DEDUCTIONS TOTAL OSD TOTAL
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000)
Proseware
Gross Profit P 870,000 OSD @ 40% (580,000)
Operating Expenses (408,900)
Net Taxable Income P 461,100 P 870,000
TAX DUE: first 400K P 30,000
Excess @ 25% 15,275
TOTAL P 45,275
Less: Quarterly payments 25,416
TAX PAYABLE P 19,859
20
Sample Problem – Income from Business or Profession
• ITEMIZED vs. OPTIONAL STANDARDS DEDUCTION, 40%)
ITEMIZED DEDUCTIONS TOTAL OSD TOTAL
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000)
Proseware
Gross Profit P 870,000 OSD @ 40% (580,000)
Operating Expenses (408,900)
Net Taxable Income P 461,100 P 870,000
TAX DUE: first 400K P 30,000 TAX DUE: first 800K P 130,000
Excess @ 25% 15,275
TOTAL P 45,275
Less: Quarterly payments 25,416
TAX PAYABLE P 19,859
21
Sample Problem – Income from Business or Profession
• ITEMIZED vs. OPTIONAL STANDARDS DEDUCTION, 40%)
ITEMIZED DEDUCTIONS TOTAL OSD TOTAL
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000)
Proseware
Gross Profit P 870,000 OSD @ 40% (580,000)
Operating Expenses (408,900)
Net Taxable Income P 461,100 P 870,000
TAX DUE: first 400K P 30,000 TAX DUE: first 800K P 130,000
Excess @ 25% 15,275 Excess @ 30% 21,000
TOTAL P 45,275 P 151,000
Less: Quarterly payments 25,416
TAX PAYABLE P 19,859
22
Sample Problem – Income from Business or Profession
• ITEMIZED vs. OPTIONAL STANDARDS DEDUCTION, 40%)
ITEMIZED DEDUCTIONS TOTAL OSD TOTAL
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000)
Proseware
Gross Profit P 870,000 OSD @ 40% (580,000)
Operating Expenses (408,900)
Net Taxable Income P 461,100 P 870,000
TAX DUE: first 400K P 30,000 TAX DUE: first 800K P 130,000
Excess @ 25% 15,275 Excess @ 30% 21,000
TOTAL P 45,275 P 151,000
Less: Quarterly payments 25,416 140,833 + 32%(217,500-166,667) 157,100
TAX PAYABLE P 19,859
23
Sample Problem – Income from Business or Profession
• ITEMIZED vs. OPTIONAL STANDARDS DEDUCTION, 40%)
ITEMIZED DEDUCTIONS TOTAL OSD TOTAL
Sales P 1,450,000 P 1,450,000
Cost of Goods Sold ( 580,000)
Proseware
Gross Profit P 870,000 OSD @ 40% (580,000)
Operating Expenses (408,900)
Net Taxable Income P 461,100 P 870,000
TAX DUE: first 400K P 30,000 TAX DUE: first 800K P 130,000
Excess @ 25% 15,275 Excess @ 30% 21,000
TOTAL P 45,275 P 151,000
Less: Quarterly payments 25,416 140,833 + 32%(217,500-166,667) 157,100
TAX PAYABLE P 19,859 P 6,100
24
MIXED INCOME EARNER

• Refers to a compensation-
earner who at the same
time is engaged in business
or practice of profession.

25
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME

Proseware
TOTAL TAXABLE COMPENSATION INCOME
ADD: BUSINESS INCOME

TOTAL TAXABLE INCOME

TAX DUE:

LESS: Tax Withheld From Compensation

Tax Paid for Business/Prof’l Income
26
TOTAL TAX PAYABLE
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000

Proseware

27
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY
Proseware
BASIC PERSONAL EXEMPTIONS

28
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0

29
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME

30
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000

31
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000

32
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000

33
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000
TOTAL TAXABLE INCOME

34
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000
TOTAL TAXABLE INCOME P 1,180,000 P 1,230,000

35
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000
TOTAL TAXABLE INCOME P 1,180,000 P 1,230,000
TAX DUE: OLD - first 500K; TRAIN – first 800K P 125,000 P 130,000
OLD - excess @ 32%; TRAIN – 30% 217,600 342,600 129,000 P 259,000

36
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000
TOTAL TAXABLE INCOME P 1,180,000 P 1,230,000
TAX DUE: OLD - first 500K/ TRAIN – first 800K P 125,000 P 130,000
OLD - excess @ 32%; TRAIN – 30% 217,600 342,600 129,000 P 259,000
LESS: Tax Withheld From Compensation
Tax Paid for Business/Prof’l Income
37
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000
TOTAL TAXABLE INCOME P 1,180,000 P 1,230,000
TAX DUE: OLD - first 500K/ TRAIN – first 800K P 125,000 P 130,000
OLD - excess @ 32%; TRAIN – 30% 217,600 342,600 129,000 P 259,000
LESS: Tax Withheld From Compensation P 68,000 P 19,376
Tax Paid for Business/Prof’l Income 243,400 311,400 157,100 176,476
38
 How to compute Income Tax for Mixed-Income Earner?
OLD LAW TRAIN LAW
COMPENSATION INCOME P 360,000 P 360,000
ADD: 13TH MONTH PAY 30,000 30,000
TOTAL COMPENSATION INCOME P 390,000 P 390,000
LESS: 13TH MONTH PAY 30,000 30,000
Proseware
BASIC PERSONAL EXEMPTIONS 50,000 0
TOTAL TAXABLE COMPENSATION INCOME P 310,000 P 360,000
ADD: BUSINESS INCOME P 1, 450,000 P 1, 450,000
LESS: 40% OSD (580,000) 870,000 (580,000) 870,000
TOTAL TAXABLE INCOME P 1,180,000 P 1,230,000
TAX DUE: OLD - first 500K/ TRAIN – first 800K P 125,000 P 130,000
OLD - excess @ 32%; TRAIN – 30% 217,600 342,600 129,000 P 259,000
LESS: Tax Withheld From Compensation P 68,000 P 19,376
Tax Paid for Business/Prof’l Income 243,400 311,400 157,100 176,476
TOTAL TAX PAYABLE P 31,200 P 82,524 39
 COMPARATIVE TAX SCHEDULE
OLD LAW (2017 and prior) TRAIN LAW (2018 – 2022)
INCOME PER YEAR TAX RATE INCOME PER YEAR TAX RATE

P10,000 and below 5% P250,000 and below 0%

Proseware
Above P10,000 to P30,000 P500 + 10% of the excess over Above P250,000 to P400,000 20% of the excess over P250,000
P10,000

Above P30,000 to P70,000 P2,500 + 15% of the excess over Above P400,000 to P800,000 P30,000 + 25% of the excess over
P30,000 P400,000

Above P70,000 to P8,500 + 20% of the excess over Above P800,000 to P2,000,000 P130,000 + 30% of the excess over
P140,000 P70,000 P800,000

Above P140,000 to P22,500 + 25% of the excess over Above P2,000,000 to P8,000,000 P490,000 + 32% of the excess over
P250,000 P140,000 P2,000,000

Above P250,000 to P50,000 + 30% of the excess over Above P8,000,000 P2,410,000 + 35% of the excess over
P500,000 P250,000 P8,000,000

Above P500,000 P125,000 + 32% of the excess over

P500,000 40
ThankYou
Ver V. Tapar
534 - 8267
Ver.tapar@gmail.com
www.rtu.edu.ph