Sotto files bill raising tax-free annual income cap to P350,000

MANILA, Philippines — Acting on President Marcos’ call for tax relief, Senate President Pro Tempore Vicente Sotto III on Tuesday introduced a bill raising the annual income tax exemption ceiling to P350,000.

If enacted, Senate Bill No. 2338, or the Expanded Income Tax Exemption Act of 2026, would exempt workers earning up to P350,000 annually, or about P30,000 a month, from paying income tax beginning Jan. 1, 2027.

In his 5th Sona, Marcos urged Congress to “cover more workers in tax exemptions. Let us include those earning up to P350,000 a year.”

Sotto said the existing exemption under the current Tax Reform for Acceleration and Inclusion Act (Republic Act 10963)—which only exempts workers earning an annual income of up to P250,000—no longer reflects economic realities.

Wage hikes, inflation

SB 2338 explained that “successive rounds of wage and salary adjustments have…pushed minimum wage and entry-level workers past a [tax exemption] ceiling that has not moved.”

This has “drawn them into the tax net without any real improvement in what their earnings can buy,” stated the measure.

Sotto also cited the Middle East conflict and its inflationary impact here on food, transportation and electricity costs, which “have risen faster than wages.”

“To continue taxing the incomes of workers in these circumstances, at a ceiling fixed eight years ago, is to ask the least able to bear the most,” he said, referring to RA 10963 which was enacted in 2018.

Sotto said his measure “recomputes the fixed amounts in the succeeding brackets” so as not to disrupt the tax system’s schedule.

Besides the exemption for taxpayers “earning at or below the new ceiling,” other taxpayers above the new exemption threshold “pay P15,000 less each year,” he said.

“This measure aims to provide meaningful tax relief and allow Filipino workers to keep more of what they earn,” added the senator.

Corporate tax relief, amnesty

Marcos vowed in his Sona that “we will pursue tax relief measures that promote growth, that generate revenue, and advance equity toward socio-economic sustainability.”

Besides his recommendation to exempt more workers, he also proposed to “exempt small businesses from the minimum corporate income tax.”

He noted that this year, the Bureau of Internal Revenue has already applied a “one-time tax abatement” for micro-enterprises.

The government’s objective, Marcos said, is to “provide some relief to businesses that have sustained losses or are earning little profits.”

Early passage

A more sweeping proposal in his speech is the granting of amnesty to “unpaid income, estate, donor’s and value added taxes including their corresponding penalties.”

In a press briefing on Monday, Marikina Rep. Miro Quimbo said the House of Representatives will take up most of Marcos’ proposed tax measures as “a single bill” that may be passed by August, including the wider coverage of income tax exemptions and the exemption of small enterprises from the corporate income tax.

Quimbo, chair of the House ways and means committee, said his committee will conduct a “comprehensive review” of the country’s income tax brackets with the aim of providing financial relief to middle-income earners.

He said the House may pass the President’s other recommendation for a broad tax amnesty by October. —WITH A REPORT FROM KENNETH CHRISTIANE BASILIO

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