MANILA — The Department of Finance (DOF) has debunked claims that a new tax was imposed on bank deposits, stressing that the recently enacted Capital Markets Efficiency Promotion Act (CMEPA) merely levels the playing field by standardizing tax rates on interest income across all deposit terms.
The clarification came after Finance Secretary Ralph Recto faced a wave of criticism on social media, with some users erroneously branding the law as anti-poor and accusing him of backing legislation that raises the value-added tax.
“CMEPA does not impose a new tax, instead standardized the tax rate on interest income to correct an unfair system that favored the wealthy,” the DOF said in a statement.
Prior to the passage of CMEPA, the National Internal Revenue Code of 1997 already imposed a 20 percent final tax on interest earned from deposits maturing in less than three years. However, longer-term deposits benefited from significantly lower rates—12 percent for three to four years, 5 percent for four to five years, and full exemption for deposits exceeding five years.
“This special tax treatment favored depositors who can afford to park their savings in long-term deposits, making the tax system unfair for short-term depositors who face liquidity issues and need immediate access to their funds,” the statement added.
“Under CMEPA, the tax on interest income has been equalized at 20% to simplify compliance, eliminate confusion, and ultimately level the playing field for all Filipinos,” it further explained./PN
