Its a complex idea. But if they have you pay 20pct for the first six months then use those funds already withheld to pay for any taxes due the rest of the year you may come out ok.
Provided you can afford the 20pct cut in salary the first six months that is and still pay your bills.
It could work for some people. Lets do an exercise. Say you made 100,000nt a month for 12 months and got a 13th month as bonus at the end of the year? So on the old program say you had 6pct withheld monthly and your taxes were right about 6pct actual at the end of the year when you filed your income tax and you ended up not having to come up with more money but also not getting anything back. And it was up to you to save a portion of your annual income if you wanted to (and of course you should) and you had the 13th month as your annual bonus as you are not going to get much of a tax refund. So you had this 13th month as fun money for trips or whatever. Maybe that trip to Thailand. Thats your year.
Now under the new formula you had 20,000/month taken away each month for the first six months. This is 14,000 more per month then would have been taken under the old formula or about 467 nt/day. Not inconsequential but probably survivable considering the old formula you had about 3133/day after taxes and now have about 2667 a day. So perhaps you cant save the 10,000nt/month you were saving up under the old tax table, but this extra 14,000/month will be alleviated IF you were saving 10,000nt/month. Only IF you were, if you needed every penny of your income you are not in a good position at this point. And then the second half you had zero withheld because you have already built up a big war chest. Then you would have the full 100,000/month to work with. And at the end of the year you still got the 13th month bonus (taxes withheld at 6pct) and had the rest of your income withheld at 10pct effectively . As 20pct for the first half and nothing for the second half means 10pct for the year. And thus you could expect a 4pct refund from your taxes withheld or about 48,000nt (not counting the 13th month for which tax withheld remains the same under both formulas). This would be a nice chunk of change. So basically you now had the 13th month as fun money for the trip to Thailand as per the old formula but with the new formula enjoyed a tax holiday for the second half of the year and only had to scrimp a bit the first half but now have a forced savings of 48,000 that you could keep in the bank and/or help tide you over the "humpââ for the lean first six months of the next year? Plus dont forget the second half of the year you have the full 100,000nt per month to work with instead of the old 94,000nt/month because you are not having any money deducted the second half? So you have 6000/month more for each month of the second half to save up with or have fun with. And thats 36,000nt.
For people who cant save money, this would help keep you in better financial health as its a free govt managed money management formula for YOU !!! Yes I should work for the govt mouthpiece
Because if you are not a money saver by nature:
- old formula:
Monthly 6pct withheld equals pretty much your taxes for the year, no more needed and nothing back. Leaves you with 94,000/month to work with and a 13th month as your annual bonus to save or use on a trip. If you are not good at money management you will basically have not much left over from your work year.
- new formula:
48,000 refund at the end of the year (yes I know you dont actually get this until you file your taxes and get the refun in the next year)
6,000 more each month the second half of the year (but since you are not a money saver, this could end up going to more beer)
13th month bonus still taxed the same and still usable as you planned.
Actual savings possible 48,000 + 36,000 (if you didnt piss this 6000/month x 6 months away) = 84,000nt/year. Added to whatever else you save up, including perhaps your 13th month if you are miserly and only take the wildchicken bus to kenting and take a tent for your annual holiday.
At any rate, you will likely end up with at least the 48,000 that you got in one chunk. But if you use that for a new puter?? Well âŚat least you got that new puter you wanted.