Almost Direct Tax on a 7 Year Old

10/21/11

My seven-year old son is also being taxed by the government in the least expected place, his kiddie bank account.

After a few days of being sick in bed, I finally got around to updating my financial excel file. I was perusing the grocery receipts, as well as atm and other bank papers when I chanced on his bank passbook which I had updated the past few weeks. I was glad to see that he’s cash has earned, albeit little interest. I know beforehand that the bank interests in the country are not that big really. The ultimate goal is teaching the kid the value of saving and not really to earn big interest, yet.

Upon a second look, I also noticed another column of a slightly smaller amount which, upon a correct guesswork, is the withholding tax. Now don’t get me wrong here about the notion of nobody is exempted in taxes. I know that everything can be taxed even a preconceived child. It starts from the pregnancy test kit that a lady buys at a drugstore up to the milk, diapers, and school supplies that the kid will consume. This is a harsh reality of taxation.

I have recently read somewhere in the papers that the BSP has been trying to encourage children to open their own savings account since Filipinos are not really big savers but more on big “loaners/londoners.” But how can one encourage these young people to be active savers if even they would see right there on their passbooks that almost 20% of the already meager interest that they get. Again, we are not really after the earnings that they’ll get here but to encourage them to save up. But how would you be encouraged to save up in a bank if you’re money will only be slapped with tax? Wouldn’t there be any tax exemptions for these children in their savings accounts just to invest in our country’s possible future savers?