Palace debunks claims 20% tax imposed on bank savings

INQUIRER FILES

MANILA, Philippines — Malacañang on Friday debunked misleading claims online that a 20 percent tax will be imposed on bank savings, clarifying that the tax applies only to the interest earned, not the total amount in the account.

This clarification came after the public had been thrown into a state of panic following the spread of misleading posts about the Capital Markets Efficiency Promotion Act (CMEPA), which took effect on July 1.

READ: Explainer: 20% tax on interest income from bank deposits under CMEPA

“What will be taxed is not the savings themselves, but the interest earned from our savings. Our savings will never be reduced just because of this so-called taxation,” Palace press officer Claire Castro said at a briefing.

“For example, if you have P100,000 in savings with a 1 percent interest rate, it will earn P83.33 in interest per month—that’s the income from your savings. In this case, your P100,000 savings will not be reduced; instead, the tax will be deducted from the P83.33 interest. So how much will be deducted? It turns out that only P16.66 will be taken from the interest earned,” she explained.

This tax, she said, will be a big contribution to sustaining government programs.

Castro further said the 20 percent tax on interest earnings from bank deposits is not new and has been in place since 1998.

“The only difference now is the removal of preferential rates for deposits that are locked in for longer maturities. These are for those who availed of long-term investments — in other words, they won’t withdraw their money for five years, so they earn higher interest because it’s considered an investment, not just regular savings,” she said. /das