Senate to tackle exemption of low-wage earners from withholding tax

Apart from the 2006 budget and the anti-terrorism bill, the Senate will tackle measures that would exempt minimum-wage earners from paying income taxes, Sen. Ralph Recto said yesterday.

Recto said two bills that propose to reduce individual income tax rates are pending before the Senate ways and means committee, which he chairs.

He added that the Senate is also waiting for a similar bill from the House of Representatives to start the ball rolling once Congress resumes regular session next week.

Recto said the measure is also meant to address the impact of raising the value-added tax rate by two percent, which would raise the VAT on goods and services to 12 percent by next year.

Recto proposed a 20-percent tax cut while a bill filed by Sen. Juan Ponce Enrile called for a 90-day slash in tax rates.

Raising the personal income tax exemption will trigger across-the-board benefits, considered tax relief measures, which can be enjoyed by all workers regardless of income, according to Recto.

"The emerging idea is to at least exempt the present highest minimum-wage earner from income tax," he said. The government can start on the minimum wages categorized by region and worker class. Workers in Metro Manila receive a minimum of P325 per day.

"That could be a starting point for discussion and we can work from there. There are proposals to exempt the combined income of two minimum-wage earners in the family from tax," Recto said.

Under Recto’s proposal, a family of four could claim as much as P96,000 in income tax exemptions.

The proposal to exempt from income tax the joint annual income of two minimum-wage earners would effectively double the maximum income tax exemptions enjoyed not only by minimum-wage earners but those with higher incomes, he said.

At present, there are seven brackets in the individual income tax schedule. The lowest one imposes a five-percent tax on taxable income of P10,000 and below while the highest level exacts from the taxpayer a basic tax of P125,000 plus 32 percent of any amount exceeding P500,000. — Christina Mendez