Locked In and Let Down: The Harsher Side of Financial Reform
Meet Joanna Reyes, a 38-year-old supervisor at a private hospital. But she could also be anyone’s mom or aunt—working hard to balance her children’s tuition fees, groceries, and her aging parents’ needs. Earning ₱45,000 a month, she carefully set aside her bonuses, building a ₱300,000 five-year time deposit. This money was meant for emergencies or job loss. This was her safety net. But this year, her bank statement shocked her: her expected interest had been cut by a 20% tax she assumed she had avoided. In disbelief, she thought, “Just a month ago, the interest on five-year deposits was tax-free. What happened?”
This 20% tax on interest has existed since 1998, but only now, in 2025, has a new law brought it back to the headlines. For decades, the tax rules created a loophole: while ordinary savers paid the full 20% on short-term deposits, those who had the wealth to keep money untouched in five-year or longer time deposits enjoyed a complete exemption. As criticism rose that this system solely benefits wealthier Filipinos, the government decided the way forward was to remove tax exemptions.
But does this truly “level the playing field,” or does it make things harder for everyone? Just because a policy is old doesn’t mean it’s harmless. Just because it’s framed as “fair” doesn’t mean it’s truly equitable. On July 1, 2025, the Capital Markets Efficiency Promotion Act (CMEPA) replaced all tax tiers with a flat 20% rate on interest earned from any time deposit, regardless of holding period. Yet many depositors were caught off guard as banks like Metrobank, EastWest, and Robinsons Bank only released public advisories between July 2 and 15. The lack of communication didn’t just cost people money—it cost them their trust. For many, the shift felt more like a trap than a reform.
CMEPA may claim fairness because removing tax breaks for long-term deposits targets wealthier depositors, but in reality, it punishes families and individuals who save responsibly far more than it affects the wealthy. The disproportionately affected are people who rely on savings for tuition fees, medical needs, and/or retirement. They’re everyday savers, often living paycheck to paycheck. For them, saving is not just a habit. It’s a sacrifice. Setting aside an emergency fund is critical because one hospitalization could wipe out all their money. And yet, instead of being rewarded for saving patiently, they’re penalized with reduced returns. Worse, many can’t pull out early without being charged a fee.
The intention behind CMEPA was to promote inclusion and reduce preferential treatment—removing tax breaks that once benefited high-net-worth individuals. But who really pays? Wealthier depositors have the option to transfer their money to stocks, real estate, or mutual funds, investments that are taxed differently and provide higher returns. Meanwhile, middle-income families, Overseas Filipino Workers, retirees, and the like are left with less and taxed the same. As economist Emmanuel Leyco explains, taxing all interest income equally removes the incentive for ordinary savers to save their money for longer terms, making disciplined saving seem no more beneficial than short-term deposits.
CMEPA also aimed to stimulate investment by lowering stock transaction taxes and removing certain stamp duties. But these changes mostly benefit those who are already financially literate or have extra money to invest. In a country where financial education isn’t easily accessible, such reforms can’t replace the value of secure savings. For most Filipinos, the ability to save safely—not speculate—is still the backbone of financial stability.
As New Lifers who will one day start earning and saving, it’s important to be critical about how government policies today affect our financial futures. CMEPA may be raised under the guise of fairness, but its real-world results yield a different story. Any policy should be evaluated carefully, not only in theory but also, most crucially, in terms of its impact on different socioeconomic groups. Ultimately, government reforms in general must be better communicated and aligned with the people who trust them—the people they claim to protect.
