taxes

"I don't want a raise."

Receiving a salary increase or a Christmas bonus should be a cause for joy, but for many workers that is not the case.

"With the current tax code I don't want an increase," a professional who spoke on condition of anonymity said when he found out he received a salary increase of $50, from $800 to $850 a month. "It's as if they never gave me a raise." A $50 increase represents less than $13.50 in disposable income after deductions for social security and education insurance.

Accountant Francisco Ba- rrios said the new tax code especially affects people earning between $9000 and $10,000 because they will be subject to a 73 percent "impuesto sobre la renta" or ISR tax. However, those who make less than $8000 a year would not have to pay any taxes at all. Workers earning between $10,000 and $15,000 would have to pay 16.5 percent in ISR taxes.

Those who earn $15,000 to $20,000 annually would be subject to a 19 percent tax rate. Thise earning between $20,000 and $30,000 would pay 22 percent, and those making more than $50,000 a year would have to pay 27 percent.

Thus, if a worker earns $9,000 a year and receives an increase of $1000 a year, his annual income tax will amount to $730. But if he earns between $10,000 and $15,000 a year, the income tax diminishes to 16.5 percent.

Annualization

Barrios explained that income tax, which is paid monthly, is estimated by annualizing the monthly salary.

A person who earns $800 a month, plus a tenth of each month, which is customary in Panama, has an income of $10,400 a year. If this same person were to receive a $600 bonus at the end of the fiscal year, Barrios said, he or she would end up paying more in income taxes because the exemption would not apply to those earning $11,000 a year. This situation virtually nullifies the $600 increase because the worker would have to pay out the same amount in taxes.

Panameñista deputy José Isabel Blandón stated that the Government reform is unjust.

"The Government must reassess the tax reform, and that is why I introduced a bill which would lift the burden from Panamanian workers," he said.

Among the changes Blandón is pushing forward is the deduction for private schools tuition.