THE House Committee on Ways and Means on Tuesday began deliberations on the Marcos administration’s proposed income tax reform, saying the measure would restore tax relief to an estimated 4.2 million Filipino workers whose salaries have merely kept pace with inflation.
Opening the Department of Finance briefing on the proposed reforms, Committee Chair Rep. Romero Federico “Miro” S. Quimbo said the proposal answers President Ferdinand R. Marcos Jr.‘s policy directive during his penultimate State of the Nation Address and seeks to address the plight of the country’s “missing middle.”
“The President’s policy directive during his penultimate SONA to initiate income tax reform has struck a chord with millions of Filipino workers. The proposal resonates because it finally addresses the concerns of the country’s ‘missing middle’. These are lower and middle-income workers — the backbone of our economy — who faithfully pay taxes every payday but fall through the cracks: unseen by our policies and ineligible for government assistance,” said Quimbo.
He explained that while wages have increased since the implementation of the TRAIN Law in 2018, the cost of basic necessities has likewise risen, pushing many workers into higher tax brackets even though their salary adjustments merely kept pace with inflation.
“Salary adjustments intended merely to keep pace with the rising cost of living have caused many workers to exceed the P250,000 threshold and become taxable once again,” pointed out Quimbo.
He noted that the purchasing power of today’s salaries is comparable to what workers earned in 2018, making the existing income tax threshold outdated.
According to the lawmaker, “in real terms, the purchasing power of today’s P28,000 salary is roughly comparable to what P21,000 could buy in 2018. The worker is paying income tax not because of an increase in wealth, but because the tax threshold has remained unchanged despite years of inflation.”
Quimbo said the proposal to increase the tax-exempt threshold from P250,000 to P350,000 annually would restore the intended relief for workers while extending the benefit to even more Filipino families.
“Therefore, raising the threshold to P350,000, as proposed by the President and as echoed by Speaker Bojie Dy and Majority Leader Sandro Marcos, restores the intended tax relief for many workers whose salaries have merely kept pace with inflation and also extends relief to even more low and middle-income families,” said the House leader.
He clarified that the proposed P350,000 threshold refers to annual taxable income, not gross annual compensation, adding that after mandatory deductions and tax-exempt benefits, a worker earning up to approximately P410,800 annually may still qualify for income tax exemption.
Citing data from the Labor Force Survey, Quimbo said an estimated 4.2 million workers would benefit from the proposal, with 1.3 million regaining tax-exempt status, another 1.2 million becoming newly exempt, and the remainder consisting of new entrants to the labor force who would likewise be exempt from paying income tax.
He stressed that “this reform will increase the take-home pay of low- and middle-income workers, and is in effect, a wage increase without imposing additional labor costs on employers.”
Quimbo also expressed support for removing the two-percent minimum corporate income tax for qualified micro and small enterprises, saying businesses with little or no net profit should not be pushed further into losses.
At the same time, he emphasized that the proposed reforms would be pursued responsibly to protect the country’s fiscal position.
“But while we are resolute to pursue income tax reform, we are equally committed to maintaining fiscal responsibility. The proposed reforms will have revenue implications, making it necessary to adopt compensatory measures,” said the legislator from Marikina.
“These measures, however, must be fair, equitable, and carefully designed so they do not dilute the intended effects of the tax reforms for our middle class. That is the balance we seek and that is the commitment of this Committee.”
metrosundaily
