The proposed Comprehensive Tax Reform Program will exempt 4.66 million Filipinos, or more than double the current figure of 1.8 million, from paying personal income taxes, a Finance official said Wednesday.
Finance undersecretary Karl Kendrick Chua said the tax reform bill now pending in Congress would exempt 83 percent of individual taxpayers from the personal income tax, including 1.8 million minimum-wage workers who were already paying zero income tax as mandated by law, and close to 3 million earners with a net taxable income of P250,000 and below, based on Bureau of Internal Revenue data.
Chua said House Bill No. 4774, which represented package one of the CTRP, also provided for revenue-enhancing measures to offset the revenue erosion from the lower PIT rates. HB 4774 was authored by Quirino Rep. Dakila Carlo Cua, who chairs the House ways and means committee.
“These revenue-enhancing measures primarily targets rich consumers and taxpayers so the government can still raise enough money for its unprecedented massive public investment program under the Duterte administration,” Chua said at the recent hearing of the House ways and means panel.
At the hearing, which focused on the personal income tax reductions, Chua said those earning between the above-minimum wage rate and P22,000 a month would pay zero tax under HB 4774. The first P82,000 in the 13th month pay and other bonuses will be exempted from the PIT computation.
Public school teachers classified as teacher I and II are also covered by the zero-tax bracket.
A teacher II who earns P20,651 monthly or a gross income of P299,114 a year inclusive of benefits, is taxed P18,011 under the current system.
But under the proposed tax reform plan, a teacher II will already be PIT-exempt, which means he or she gets to take home P18,011 more per year or an additional P1,500 a month.
An above-minimum wage earner with a monthly pay of P15,000 will get to take home at least P7,200 more with tax reform, because of his or her PIT-exempt status.
Chua said even middle-class taxpayers would benefit from tax reform by way of substantially lower PIT rates.
A government employee with Salary Grade 24, or one earning P56,610 a month, will have to pay P137,981 in PIT. But under HB 4774, the tax will be substantially reduced to P90,141, effectively increasing the take-home pay to P47,840 a year or an addition of almost P4,000 a month.
HB 4774, Chua said, will shift the tax burden to rich taxpayers.
A high-income earner who is paid P877,500 a month shells out P4,048,456 in PIT under the current system. Under HB 4774, this PIT will increase to P4,200,186 or by P152,730.
Chua said that taxing the ultra-rich through their income was not enough because they comprised only less than 1 percent of the country’s individual taxpayers, based on BIR data. Those with a net taxable income of over P80,000 comprised only 3 percent of the individual taxpayer base.
The PIT reforms will lead to revenue losses estimated at P63 billion in the second half of 2017, P138 billion in 2018 and P152 billion in 2019, Chua said.
Thus, to raise enough funds for the Duterte administration accelerated spending on infrastructure, education, health, and social protection for the poorest of the poor, a set of revenue-enhancing measures is also tucked in HB 4774.
These include expanding the value-added tax base but retaining exemptions for seniors and persons with disabilities, and adjusting the excise taxes on automobiles and fuel, which will hit rich consumers the most as these are all consumption taxes.
Estate and donor taxes will also be reduced to a flat 6 percent under the tax reform bill.
