Under the Philippine government’s Comprehensive Tax Reform Program (CTRP), about 4.66 million taxpayers, or more than double the current figure of 1.8 million, will no longer pay personal income taxes (PIT).
This simpler, fairer and more efficient system targets low- and middle-income Filipino families, reported Manila Bulletin.
The country’s Department of Finance (DOF)-endorsed tax reform bill, now pending in the Congress, will exempt 83 percent of individual taxpayers from the PIT, including 1.8 million minimum-wage workers who are already paying zero income tax as mandated by law, and close to another 3 million earners with a net taxable income of P250,000 and below, based on Bureau of Internal Revenue (BIR) data, Finance Undersecretary Karl Kendrick Chua reportedly said.
He was quoted as saying that House Bill No. 4774, which represents Package One of the CTRP, also provides 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.
At the hearing, which focused on the PIT reductions, Chua reportedly said those earning between the above-minimum wage rate and P22,000 a month will 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.
For instance, a call center agent who earns P21,000 a month with a gross income of P273,000 inclusive of the 13th month pay and other benefits, will still fall under the zero-tax bracket, the report said.
This will save him or her almost P22,000 in foregone income tax payments because under the current system, the call center agent, even with two dependents, would still have to pay P21,867 in income tax because of an outdated tax structure in which his or her net taxable income of P136,834 would still be taxed P8,500 plus 20 percent in excess of P70,000.
Chua reportedly noted that HB 4774 aims to correct this form of income “creeping through” the adoption of a simplified and fairer system where the call center agent’s declared deductions and exemptions of P36,166–inclusive of the 13th month pay and mandatory contributions–would be deducted from the gross income of P273,000.
This will yield for this type of taxpayer a net taxable income of P236,834, which still falls under the zero-tax bracket, Chua said.
“Thus, under the tax reform bill, the call center agent’s take home pay will effectively increase by P21,867 annually because he would no longer have to pay this amount of income tax under the current system,” Manila Bulletin quoted Chua as saying.
Public school tutors classified as Teacher I and II are also covered by the zero-tax bracket, said the news portal.
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 reportedly said even middle-class taxpayers will 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 only P90,141, effectively increasing the take-home pay to P47,840 a year or an addition of almost P4,000 a month, the report said.
HB 4774, Chua reportedly said, will shift the tax burden to rich taxpayers.
For instance 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 pointed out though, that taxing the ultra-rich through their income is not enough because they comprise 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 comprise 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, Manila Bulletin quoted Chua as saying.
