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For good na? O konting push pa?

“Stay in the UAE, but start investing and establishing businesses in the Philippines because the fast-growing micro and medium businesses can extremely benefit from TRAIN Law.”

DUBAI: Overseas Filipino workers (OFWs) in the UAE, faced with a 5% value added tax (VAT), would still be better off staying put than going home despite the tax reform measures and the robust economy back there, experts told The Filipino Times.
Better yet, invest in the Philippines while you are here, they said.

Engr. Joel Foronda, newly elected FilCom chairman, could not have put it more succinctly: “Kung uuwi, makakasama mo pamilya mo, pero ano assurance na makakakuha ka ng trabaho sa same linya mo? Dito may VAT. Mag-aadjust ka lang sa mga gastusin mo.”

He added, “Ako tinitimbang ko. Halimbawa kung dito sahod ko ay Dh10,000 that is P130,000. Sa Pilipinas pinakamalaking masasahod ko ay P40,000.” (You can be with your family if you choose to go home, but what are the chances of your getting a job there that’s within your line of profession? We have VAT here and we only need to adjust expenses. I’m weighing things: If I am making Dh10,000 here for instance, that’s around Php130,000; in the Philippines, the highest pay I could get is Php40,000.)

1 12 Engr. Joel Foronda
Engr. Joel Foronda

TRAIN explained

The Philippines rolled out its Tax Reform for Acceleration and Inclusion (TRAIN) law on Jan. 1 – the same day VAT was introduced in the UAE.

TRAIN’s salient points include a reduction in personal income tax, an expansion of the VAT base, increase in excise tax of certain petroleum products as well as of cars and sugary drinks.

Atty. Barney Almazar of Gulf Law, said that while TRAIN “may provide the minimum wage earners a higher take-home pay, they may also expect a higher monthly household bill.”

“In effect,” he said, “the additional take-home pay is offset by the increase in the price of goods and services.”

He further explained that those in the high-income bracket may expect higher tax on income but, at the same time, enjoy the reduction of tax on luxury cars. On the other hand, Almazar said, salaried workers eyeing basic utility cars can expect to pay higher price for an entry-level car.

“OFWs in the UAE may need to tighten their belts due to the 5% VAT and excise tax on selected goods such as soda and energy drinks. If an OFW wishes to send the same amount of money to his family in the Philippines, he need to cut back on his expenses,” said Almazar.

“Assuming that his family in the Philippines are working and would benefit from the reduced income tax, the OFW’s reduced remittance maybe mitigated by the higher take-home pay of his family back home,” he added.

The nice thing about TRAIN is that tax laws, whether in the Philippines or UAE, are intended to finance social and infrastructure programs to improve the lives of not just the rich or poor but everyone, said Almazar.

“Unfortunately, unlike the speed of a train, the long-term benefits of the new tax law may take years for us to see. In the meantime, Filipinos should sacrifice a bit and save but more importantly, be vigilant to ensure that the taxes they paid are accounted for,” he said.

2 2 Atty. Barney Almazar e1517423440703
Atty. Barney Almazar

Is it time to go?

Dean Rex Venard Bacarra, doctor of philosophy and head of the General Education department at The American College of Dubai, said that with VAT and TRAIN, “an OFW may be tempted to ask, ‘Is it time to go back to the Philippines?'”

“A comparative study yields this advice: It is to stay in the UAE for now,” said Bacarra, and for two reasons: “One,” he said, “the pay in the Philippines is not comparable still to the pay that an OFW receives in Dubai.

“It is still low. Unless you are a business owner, only then the thought of going home should be fully entertained.

“Two, healthcare, public education, public transportation like taxis, metro, and buses, and generally small business operations are not taxed in Dubai. There is also one thing that needs consideration- safety. Dubai is definitely safer.”

Bacarra’s advice was hinged on two premises: First, TRAIN, which he considers “a breath of fresh air for Filipinos” because it “corrected the unfair and complex tax scheme of the old days,” lowers and even exempts both the income and withholding taxes.

“For example,” he explained, “if you have Php21,000 salary and below, you are exempted from the almost Php2,000 withholding tax, thus, generally increasing your take home pay.”

He added that small to medium companies with below Php3 million are now exempted from income tax, meaning employees and small businesses “greatly benefit from the new tax system, either through exemptions or lower taxes.”

This move is not a revenue loss for the government because, Bacarra explained, “while it alleviated the personal taxes, it hopes to generate more income by adjusting the excise or sin taxes on sugary beverages, tobacco, fuel, estate, coal, and cosmetic procedures.”

Second, UAE’s VAT is consumer-based, meaning it operates on the principle that the more a person buys, the greater burden he has to bear in the form of tax. The UAE government has listed commodities subject to VAT ergo a person would know where to cut down on.

3 7 Rex Bernard Bacarra e1517423594465
Rex Bernard Bacarra

Stay but invest in the Phils.

Bacarra said he has information that tax experts in the Philippines are in the process of filing three packages of tax reforms with tax amnesty and the lowering of corporate income tax.

“When that day comes, then it is safer to say that Filipinos should start packing and enjoy the Philippines,” he said.

Bacarra said the best way to go is stay in the UAE. But, he stressed, “now is the right time to start investing and establishing businesses in the Philippines because the fast-growing micro and medium businesses can extremely benefit from TRAIN Law.”

Adjust

“Being an OFW in the UAE where we do not have income tax, we can still enjoy life despite the 5% VAT, which is the lowest in the world,” said Silveriano “Jong” A. Prieto, Jr., president of the Philippine Institute of Certified Public Accountants (PICPA) in Abu Dhabi, said.

Prieto explained that given the 5% “escalated cost” of living, being end consumers absorbing the VAT, “we will still have a lot to share our loved ones in the Philippines.”

All that needs to be done, he said, is “adjust our purchases and buy only the things that we need.”

4 6 Silveriano A. PrietoJr.
Silveriano A. Prieto,Jr.

Albert Alba, digital marketing and communications manager at a Dubai firm, for his part, said that while VAT “has indeed raised, to a certain extent, our cost of living, it seems minimal in terms of us being able to cope and make the necessary adjustments.”

“One has to consider the percentage of the cost of living to one’s income for any OFW to decide to go back home instead to the Philippines simply because of VAT in the UAE,” Alba said.

“Yes,” he added, “expenses may have increased for the same basket of goods, but it is still relatively a smaller percentage of the OFWs’ income compared to the ratio of income and expenditure if they were living and working in the Philippines, instead.”

5 5 Albert Alba
Albert Alba

Agreed, Anthony Deleon, Dubai-based social media strategist and vlogger, who said that if it is any consolation at all, OFWs can take comfort in the thought that revenues generated from TRAIN and VAT, like what Bacarra and Almazar said, “go toward projects intended to make things better for everyone.”

“In the end, whether we accept these new taxes or not, we would still end up paying and being affected by them,” Deleon said. “What we can do is realign our budgets to cope with these changes–making it a key opportunity for us to determine what is a need and what is a want in terms of spending.”

6 2 Anthony Deleon e1517423737599
Anthony Deleon

According to the World Bank’s January 2018 Global Economic Prospects report, the Philippines “will continue to be the fastest-growing economy in the Association of Southeast Asian Nations (Asean),” with gross domestic product (GDP) projections at 6.7 percent in 2018 and 2019.

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