The government is proposing a set of tax measures which at first glance might appear to offer Filipinos some relief from their tax burdens.
As part of the Promoting Growth, Revenue and Equity towards Socio-Economic Sustainability (ProGRESS) bill, there is a proposal to raise the personal income tax-exempt threshold to P350,000 from P250,000 and to remove the minimum corporate income tax for micro and small enterprises.
The proposal is being touted as a form of tax relief intended to help Filipinos cope with the rising cost of living and allow them to keep a larger portion of their earnings.
President Marcos in his state of the nation address last July proposed increasing the annual personal income tax exemption threshold from the current P250,000 to P350,000. The Department of Finance (DOF) endorsed the proposal through the ProGRESS bill which was translated into legislation through House Bill 10345 filed by House Speaker Faustino Dy and Majority Leader Sandro Marcos.
The House ways and means committee approved the bill last Aug. 10 and the measure will soon be included in the order of business for second reading.
On the Senate side, several similar measures have been filed to increase the annual tax-exempt income threshold.
The measure appears to be advancing smoothly through the legislative process to achieve the President’s call for it to be implemented by next year.
But before rushing it, Congress and the executive branch first need to revisit the proposal to see whether it will indeed have a real impact on the lives of Filipinos.
According to the DOF, these tax relief measures are expected to benefit more than six million Filipino workers whose personal incomes will be tax-exempt and they are expected to take home around P150,000 in additional take-home pay each year.
However, it also expects the government’s coffers to take a hit as the adjustments in both the personal income tax-exempt threshold and minimum corporate income tax for micro and small enterprises would translate to about P80 billion in foregone annual revenues.
To offset revenue losses from the proposed income tax relief measures, the DOF is proposing a package of new and higher taxes on sweetened beverages, e-cigarettes, flexible plastic products, luxury vehicles and private aircraft and other products.
Under this package, the excise tax on beverages using caloric or non-caloric sweeteners would increase to P20 per liter from P6 while the tax on beverages using high-fructose corn syrup would rise to P40 per liter from P12.
The proposed sweetened beverage tax rates would be indexed by five percent annually.
It is likewise proposing to remove selected exemptions and expand the coverage to edible ices, including ice cream, frozen yogurt, sorbets and ice lollies.
The DOF also wants a unified P72.93 excise tax on e-cigarettes and heated tobacco products beginning in 2027. Novel tobacco products would be taxed at P72.93 per two grams or two milliliters while devices used for heated tobacco, vapor and novel tobacco products would be subject to a P150-per-unit levy. The rates would be indexed by five percent annually beginning in 2028.
According to the finance department, it is also proposing to raise the specific excise tax on distilled spirits to P157.21 per proof liter and expand its coverage to premixed alcoholic beverages or alcopops, with the rate indexed by six percent annually, as well as a P150-per-kilo excise tax on sando bags, labo bags and sachets.
For ordinary Filipinos, the proposed income tax measures will hardly make a dent as they only aim to help them cope with the increasing cost of living. Tax relief only matters if it translates into greater purchasing power. A higher income tax exemption may leave workers with more take-home pay but that benefit can quickly disappear if food, transport, electricity and other daily expenses continue to rise.
Higher excise costs are simply passed on to consumers in terms of higher retail prices, further weakening purchasing power and adding pressure to inflation.
The real measure of tax reform should not simply be how much taxpayers save on paper but what families can actually afford with the money they bring home.
Based on latest data from the Philippine Statistics Authority, a peso in 2018 had the equivalent purchasing power of only about 74 centavos in June 2026. Simply put, the proposed lowering of the income tax exemption threshold is not really a tax benefit but merely restores what taxpayers have lost to inflation.
However, any revenues lost by the government due to these measures will be recouped by imposing new or higher taxes on other commodities, like sweetened beverages which low-income Filipinos frequently consume.
I haven’t even started delving into how raising excise taxes on so-called sin products has actually not discouraged consumption of cigarettes but has instead increased smuggling.
What the country needs is a sustainable response that addresses rising prices and cost of living realities, not additional consumption taxes. And what about those in other income tax brackets who don’t get to enjoy the so-called income tax relief but will be burdened by higher prices of commodities that will be slapped with higher taxes? What is being done to alleviate their plight?
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