Manila: The House Committee on Ways and Means on Tuesday began deliberations on the Marcos administration's proposed income tax reform measure aimed at benefiting an estimated 4.2 million Filipino workers whose salaries have only kept pace with inflation.
According to Philippines News Agency, Ways and Means Committee chair and Marikina 2nd District Rep. Romero Federico "Miro" Quimbo initiated the committee's briefing by the Department of Finance, discussing the proposal which implements President Ferdinand R. Marcos Jr.'s policy directive from his fifth State of the Nation Address (SONA). This initiative addresses the concerns of the country's 'missing middle,' focusing on lower and middle-income workers who are crucial to the economy but often overlooked by current policies.
Quimbo highlighted that since the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Law in 2018, wage increases have primarily mirrored inflation. As a result, many workers have reentered the income tax system without a real increase in purchasing power. Salary adjustments intended to match the rising cost of living have pushed many beyond the PHP250,000 threshold, making them taxable once again.
He pointed out that the purchasing power of a monthly salary of approximately PHP28,000 today is akin to what PHP21,000 could buy in 2018, indicating that workers are not wealthier but are taxed due to the unchanged tax-exempt threshold. To counter this, Quimbo supported the proposal to elevate the annual tax-exempt income threshold from PHP250,000 to PHP350,000.
Quimbo explained that this adjustment would restore intended tax relief for many workers and extend it to more low and middle-income families. The proposed PHP350,000 threshold is applicable to annual taxable income rather than gross annual compensation. After deductions and tax-exempt benefits, a worker earning around PHP410,800 annually could still qualify for income tax exemption.
Based on data from the Labor Force Survey, Quimbo stated that the reform is expected to benefit about 4.2 million workers, including 1.3 million who would regain tax-exempt status, 1.2 million newly exempt individuals, and new labor force entrants who would no longer pay income tax.
Quimbo also advocated for removing the two-percent minimum corporate income tax for qualified micro and small enterprises, asserting that firms with minimal or no net profit should not be further burdened financially.
Furthermore, Quimbo underscored the importance of preserving the country's fiscal position as the proposed tax reforms progress. He emphasized that while pursuing income tax reform, fiscal responsibility is crucial. The proposed reforms will have revenue implications, necessitating compensatory measures that are fair, equitable, and crafted to preserve the reforms' intended benefits for the middle class.
He concluded by stating that achieving this balance is the committee's commitment.
