Manila: Salary adjustments meant to help workers cope with rising prices would no longer automatically push them into higher tax brackets under a measure filed by Senator Loren Legarda. In a news release on Tuesday, Legarda announced Senate Bill 2255, or the Keeping Incomes Tax-relieved and Augmented (KITA) Act, which aims to raise the annual tax-exempt income threshold to PHP400,000 and require income tax brackets to be adjusted every five years based on inflation beginning Jan. 1, 2029.

According to Philippines News Agency, the automatic adjustment is intended to prevent 'bracket creep,' in which inflation-driven salary increases raise a worker's tax liability despite little or no improvement in purchasing power. Under the bill, workers earning up to about PHP33,000 monthly would pay no income tax, while the tax-free ceiling for 13th-month pay and other benefits would increase from PHP90,000 to PHP150,000. The bonus ceiling would likewise be adjusted periodically for inflation.

The measure would also exempt holiday pay, night-shift differential, hazard pay, and service charges from income tax, allowing workers to keep more of their additional earnings. Overtime earnings of up to PHP100,000 would also be excluded from gross income, while amounts exceeding the ceiling would remain taxable.

Legarda emphasized that every overtime pay, bonus, and additional income is the result of hard work and sacrifice and should support essential family expenditures such as food, tuition, or medicine. Honoraria, allowances, service credits, and other benefits received by teachers and other personnel performing election duties would also be exempt from taxation.

The KITA Act proposes to raise the value-added tax exemption threshold for micro-enterprises from PHP3 million to PHP4 million, grant an additional 50 percent deduction on labor expenses, and remove withholding tax obligations for micro-taxpayers. Businesses granting mandatory discounts to senior citizens, persons with disabilities, and solo parents would be allowed to claim their cost as direct tax credits instead of deductions.

Additionally, the bill will allow tax filing deadlines to be extended during calamities or national emergencies and simplify registration requirements for taxpayers. Legarda stated that the measure aims to ensure that salary increases translate into higher take-home pay instead of being silently eroded by inflation and taxes. She asserted that ordinary Filipinos should not bear the burden of a crisis.