House panel OKs P350,000 tax-free income threshold

MANILA, Philippines — The proposal to raise the annual income tax exemption threshold to P350,000 is set to move to the next stage of the legislative process.

This comes after House Bill No. 10345, filed by Speaker Faustino “Bojie” Dy III and Majority Leader Sandro Marcos (Ilocos Norte), was approved by the House committee on ways and means on Monday, August 10.

The proposed measure seeks to raise the ceiling for tax-free annual income from the current P250,000 under existing laws to P350,000 by amending Section 24 of the National Internal Revenue Code.

This is also in line with President Ferdinand Marcos Jr.’s pronouncement during his recent State of the Nation Address about granting tax relief to the middle class.

It passed the House panel along with another measure, House Bill No. 10346, which seeks to exempt micro and small businesses from the 2% minimum corporate income tax.

The next stage would be the filing of committee reports, followed by the bills being sent to the committee on rules to be calendared for second reading, during which they would be subjected to full House deliberation, amendments and voting.

More take-home pay

According to the House committee’s press release, the proposal would give low- and middle-income workers larger take-home pay.

Under the proposed legislation, workers earning less than P350,000 per year will not be required to pay annual income tax to the government.

This means no more withholding tax deductions from the salaries of those who earn P29,000 or less per month.

House committee chairperson Miro Quimbo (Marikina 2nd district) said the measure is part of the broader effort to ensure that the tax system aligns with the “realities” faced by workers and their families.

“If incomes have not kept up with the rising cost of living, then we have to make sure that taxation does not further erode their purchasing power,” Quimbo said.

‘Most balanced’

Several measures seeking to raise the income tax exemption threshold to different amounts have been filed, but Quimbo said P350,000 is the ‘most balanced’ amount to ensure the sustainability of government resources while providing relief to taxpayers.

“Mayroong ibang proposal, P600,000, may proposal pa nga na isang milyon. Pero nakita natin na masyadong mabigat ‘yung magiging pinsala sa bottomline ng ating collection,” Quimbo said.

(There are other proposals, P600,000 [threshold], even P1 million. But we saw that it would have too much of an impact on the bottomline of our collection)

The lawmaker stressed that tax funds government programs and services for the public, and raising the exemption threshold could actually result in larger revenue losses.

This could mean, Quimbo claims, more benefits for the upper-middle class and the rich.

“Bukod sa ang bigat ng magiging revenue loss o mawawala, sa tingin natin ang makikinabang dito ay kakaunti na lang,” Quimbo said. “Na sa totoo lang, upper-middle class at mas mayaman.”

(Aside from larger revenue loss, we think [higher tax exemption threshold] could only benefit the few…who are actually upper-middle class and richer.)

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