Benel D. Lagua, former EVP of the Development Bank of the Philippines, walks through what CMEPA's new 20% final withholding tax on long-term deposit interest does to the actual math of saving. A digital bank paying 4% nominal interest yields 3.2% after the tax. Philippine inflation then erodes the remainder, and Lagua's arithmetic lands the real return at -0.6%: a saver following every rule of prudence still loses purchasing power. The policy context sharpens the point. The Philippines' savings rate sits at 13-14% of GDP against Vietnam's 27% and Indonesia's 32%, per World Bank figures cited in the piece. A country already short on the domestic capital that funds its own infrastructure and industry just removed the last positive-return incentive for the instrument most ordinary savers actually use: long-term time deposits and government bonds. The people this move affects hardest are retirees and middle-class savers who depend on interest payouts and lack the risk appetite or access to move into equities, unlike wealthier savers who have other places to preserve value. The general failure mode: a tax or policy adjustment can be locally rational (simplify rates, raise revenue) while structurally undermining a behavior the same government says it wants more of. When a reform's stated goal (more domestic investment, deeper capital markets) and its actual incentive effect (make the safest long-term savings vehicle a losing proposition after tax and inflation) point in opposite directions, the reform is working against its own premise, whatever its administrative merits. ## Source - [[20260805 Taxing Long-Term Savings - A Misstep]] — BusinessWorld, Benel D. Lagua (FINEX Folio), August 7, 2025 — https://www.bworldonline.com/banking-finance/2025/08/08/690224/taxing-long-term-savings-a-misstep/