By Justine Irish D. Tabile, Senior Reporter
TWO TAX RELIEF MEASURES proposed by President Ferdinand R. Marcos, Jr. would benefit at least 3.13 million workers and 78,000 small businesses but cost the government about P66 billion in annual foregone revenue, the Department of Finance (DoF) said.
Finance Secretary Frederick D. Go on Wednesday said raising the annual income tax exemption threshold to P350,000 from P250,000 would reduce revenues by about P60 billion a year, while exempting small businesses from the minimum corporate income tax (MCIT) would cost another P6 billion.
“The proposal will benefit at least 3.13 million workers, including an additional 1.2 million workers at the minimum who will no longer pay personal income tax, increasing the total number of tax-exempt workers from at least 5.1 million to 6.3 million,” he said.
Mr. Go noted those earning between P250,000 and P350,000 annually will enjoy up to P15,000 in additional take-home pay, while those earning more than P350,000 could receive up to P17,500 more.
“This means, of course, that there will be a bigger share of hard-earned income that can go towards everyday needs,” he said.
The DoF also said that around 78,000 businesses will benefit from the proposal to exempt micro and small enterprises from the minimum corporate income tax. This includes small bakeries, cafés, eateries, food stalls, sari-sari stores, repair shops, and other family-run businesses.
At present, qualified small corporations pay either the 2% MCIT based on gross income or the regular 20% corporate income tax based on net taxable income, whichever is higher, regardless if the businesses are operating at a loss.
Removing the MCIT would mean that covered businesses incurring losses would no longer have to pay the tax. Profitable companies would remain subject to the regular corporate income tax.
“From this particular measure, if it happens, [foregone revenue will amount to] P6 billion annually,” Mr. Go said.
To offset the revenue losses, he said the government could consider imposing more excise taxes but did not elaborate.
“All you have to do is look at the categories that are taxed with excise taxes, and normally, they would be the same industries that would be covered,” Mr. Go said.
Earlier, House Committee on Ways and Means Chair and Marikina Rep. Romero “Miro” S. Quimbo said the government plans to fully offset the revenue losses through higher excise taxes on vape products, heated tobacco, and sugar-sweetened beverages.
Deloitte Philippines Business Tax Leader Senen Quizon said removing the MCIT will allow small businesses “to be better positioned to preserve cash flow and pursue new opportunities.”
“It may entail short-term foregone revenue for the government, but the longer-term benefit lies in easing pressure on small enterprises, improving their capacity to grow and ultimately strengthening the country’s revenue base through expanded economic activity,” he told BusinessWorld via e-mail.
Asian Consulting Group Founding Chairman and Chief Tax Adviser Raymond A. Abrea said greater relief could come from expanding the coverage of the optional gross income tax regime, even if its rate is increased.
Under the Tax Reform for Acceleration and Inclusion law, qualified self-employed individuals and professionals with annual gross sales or receipts of no more than P3 million may opt to pay an 8% tax on gross sales or receipts instead of graduated income and percentage taxes.
“What we’re advocating is to increase the optional tax from 8% to 10%, but the threshold from P3 million to P20 million,” Mr. Abrea said.
A higher threshold could encourage more online sellers, self-employed workers and professionals to register, accurately declare their income and pay taxes, he added.
However, Foundation for Economic Freedom President Calixto V. Chikiamco described Mr. Marcos’ proposals as populist measures that fail to address the country’s underlying political and economic problems.
“The solutions [he] proposed are all populist — giveaways, tax reliefs, et cetera. But it doesn’t go to the root of the problem in our politics and in our economy,” he said in an interview on Money Talks with Cathy Yang on One News on Wednesday.
Mr. Chikiamco warned that granting tax relief without identifying sufficient revenue offsets could worsen fiscal risks and potentially affect the country’s credit ratings.
“This might affect even our ratings if the government is not able to identify clear sources of revenue to compensate for all of those giveaways and tax reliefs,” he said.
The National Government’s budget deficit widened by 2.8% to P786.8 billion in the first half from P765.5 billion a year earlier.
The six-month fiscal gap was equivalent to 47.4% of the government’s revised P1.659-trillion deficit ceiling for 2026, which is equivalent to 5.4% of gross domestic product.
BILLS FILED
Meanwhile, House Speaker Faustino “Bojie” G. Dy III and Ilocos Norte Rep. Ferdinand Alexander “Sandro” A. Marcos filed a bill that would raise the annual tax-free income threshold to P350,000.
House Bill No. 10345 seeks to increase the annual income tax exemption ceiling by P100,000 from the current P250,000 under the Tax Reform for Acceleration and Inclusion law, allowing more Filipino workers to keep a larger portion of their earnings.
The bill seeks to amend Section 24 of the National Internal Revenue Code by restructuring the graduated income tax rates imposed on Filipino citizens and resident aliens.
Under the bill, taxable income exceeding P350,000 but not more than P400,000 would be subject to a 15% income tax. Taxable income above P400,000 would remain subject to the existing graduated tax rates of 20%, 25%, 30%, and 35%.
Under the proposal, married taxpayers would continue to file and compute their income taxes separately, with any income that cannot be exclusively assigned to either spouse split equally between them.
The measure would also preserve the income tax exemption granted to minimum wage earners, covering their taxable income as well as holiday pay, overtime pay, night shift differential, and hazard pay.
It would likewise allow qualified self-employed individuals and professionals to continue availing of the optional 8% tax on gross sales, receipts, and non-operating income exceeding the proposed P350,000 tax-exempt threshold, in lieu of the graduated income tax rates and percentage tax.
Meanwhile, Senate President Pro Tempore Vicente C. Sotto III filed Senate Bill No. 2338 that also seeks to exempt those earning P350,000 a year from income tax.
However, Senate Finance Committee Chairperson Joseph Victor “JV” G. Ejercito filed Senate Bill No. 2341 that aims to raise the income tax exemption ceiling to P600,000.
Under the measure, taxable income exceeding P600,000 but less than P2 million will be subjected to a 15% tax rate. — with Pexcel John Bacon and Kaela Patricia B. Gabriel
