MANILA, Philippines – Sen. Juan Edgardo Angara is urging the Duterte administration to prioritize correcting and adjusting the income tax brackets to inflation, to provide immediate tax relief and raise the take-home pay of Filipino workers.
The Department of Finance (DOF) has submitted to both houses of Congress a draft bill, the first of the six packages, that seeks to lower personal income taxes while broadening the value-added tax (VAT) base and adjusting excise taxes of petroleum products and automobiles.
“While we give full credit to the Duterte administration for prioritizing income tax reform, I suggest we first work on the indexation of our existing tax rates to give our ordinary taxpayers immediate relief that is truly long overdue,” said Angara, chairman of the Senate ways and means committee.
Angara has filed Senate Bill 129 that seeks to adjust tax brackets to inflation.
Under the current tax system enacted in 1997, individuals with taxable income of over P500,000 are taxed with a fixed amount of P125,000 plus the 32 percent of the excess over P500,000.
Angara said that P500,000 in 1997 does not have the same value today due to inflation. One peso in 1997, when adjusted for inflation, is now worth only 44 centavos.
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Middle-income earners, who were mostly taxed at 20 or 25 percent in 1997, are now pushed into the top tax bracket at 32 percent, together with the billionaires of the country because of the outdated tax system.
Under the DOF proposal, those earning below P250,000 a year will be exempted from tax, while the tax rates of the “ultra rich” or those earning P5 million and above annually will be raised from 32 percent to 35 percent.
Revenue losses from the personal income tax reform, amounting to P180 billion, will be offset by expanding the VAT base by limiting exemptions to raw food, education and health.