DOF clarifies new law does not tax general savings

The Department of Finance (DOF) clarified that the Capital Markets Efficiency Promotion Act (CMEPA), now Republic Act No. 11976, does not impose new taxes on general savings but standardizes the interest income tax rate to 20 percent on specific long-term deposits.

This clarification addresses misleading social media posts suggesting all bank savings would be taxed, with DOF Secretary Ralph Recto branding these claims as "fake news."

CMEPA removes tax breaks on long-term savings with a maturity period of five years, meaning interest earned on these financial instruments, with exceptions such as the PAGIBIG MP2 program, will be taxed at a uniform 20% rate.

Interest earned by deposits of three years and below have always been taxed at 20% since the National Internal Revenue Code took effect in 1998.

Finance and tax experts assert that CMEPA eliminates loopholes that favored wealthier investors, noting that the previous exemption for long-term deposits disproportionately benefited the upper-income classes.

BPI President Jose Teodoro Limcaoco stated that CMEPA has put a uniform tax across all deposits, making the tax regime simpler and easier to understand for investors.

He emphasized that for normal savings and time deposits of ordinary Filipinos, there is no change in the interest tax.

The DOF estimates that only 0.4% of deposits will be affected by the new tax rate on long-term savings.