I paid the government P116,065.00 in personal income tax last year.
That’s a hold-up amounting to at least two or three months salary, and it goes puff! like a burst bubble. I didn’t even had the chance to get hold of the money I paid, just so I can say, “dumaan lang sa palad ko“.
Income taxes are withheld from source. In my case, as in the case of many other employees, my employer deducts a portion of my salary each pay day as my tax due to the government.
Robert Kiyosaki was right when he said that people in the E (employment) quadrant pays first the government before they pay themselves. In contrast to the rich people, or those who are in the B (Big Business) quadrant, who pays themselves first before they pay the government.
Our tax structure is very much skewed in favor of corporations. Business owners can charge their lunch, dinner, recreation, vacations, gadgets and whatnots to their company’s expenses. The more they spend, the less corporate income tax they pay. The formula for computing corporate income tax, in its simplest form is: revenue less expenses equals net profit. Thirty one percent of the net profit goes to the government as tax.
Did you get my point then? Business owners are taxed after they have paid themselves with all the luxuries they can afford. They can even declare a net loss just by spending every penny they earn so they wouldn’t have to pay taxes.
Meanwhile, salaried workers are taxed even before they get their monthly paycheck. And it does not stop there. We are also taxed every time we buy clothes, eat out, fill up our gas tank, watch a movie, ride an airplane, etc.
Terrible, you might say but that is just the way it is. The middleclass runs our economy because most middleclass are employees and it is from employees that taxes are collected almost sweat-free.
We are in a rat race. We work our butt like there is no more tomorrow, drain our body and mind, beat deadlines like hell all in the name of what– a promotion that comes seldom and sporadically? a raise just to be taxed some more? an illustrious career? Is it worth it?
The solution I believe, is to find a way out of the rat race. To do that, we must change our mindset and learn to think like a rich man. The first step is to ensure that we are financially literate.
More about financial literacy on my next post.