House OKs workers tax exemption bill

MANILA, Philippines – The House of Representatives finally approved last night a bill doubling the tax exemptions for all salaried workers, from P96,000 to P200,000 for a working couple with four dependents.

Antique Rep. Exequiel Javier, ways and means committee chairman and principal sponsor of the higher exemption measure, Bill 3971, said the new rates of exemptions would “shelter” minimum wage earners from paying income tax.

“They are a timely relief to our workers in the wake of spikes in consumer prices,” Javier said.

“The last time I rose here to extend our help to our working masses was 10 years ago, amid the debilitating Asian financial crisis,” he said.

Whatever relief taxpayers received then has been eaten up by inflation and the rising cost of living, Javier noted.

He said that Bill 3971 gives workers “hefty tax exemption increases.”

The measure will now be sent to the Senate.

Last week, House leaders could not call for a vote on the bill because of lack of quorum. But last night, taking advantage of the presence of enough members shortly after the roll call, Deputy Majority Leader Neptali Gonzales II promptly called for a vote.

Under the bill, the personal tax exemption of a working married individual would be increased from P32,000 to P50,000, while the exemption for a dependent would be adjusted from P8,000 to P25,000. A maximum of four dependents would be allowed.

Thus, a working couple would enjoy combined exemptions of P100,000, plus P100,000 for four dependents, or a total of P200,000.

Such couple, under present rates, can claim total exemptions of only P96,000 (P32,000 for each spouse, plus P32,000 for four dependents).

A single taxpayer and a head of family would enjoy the same personal tax exemption of P50,000 as a working spouse.

To recoup revenue losses from the grant of higher exemptions, Javier said the standard tax deduction for individuals “engaged in trade, business or the practice of profession” like accountants, doctors and lawyers would be increased from 10 percent to 40 percent to encourage them to pay taxes.

“They are the weakest link in our taxation for individual taxpayers. Some 80 percent of all taxes collected comes from salaried workers, while only 20 percent comes from professionals and self-employed individuals,” he stressed.

“We are increasing their deduction so that they (professionals) will come under our tax system, they will file their return and pay taxes. We are giving this incentive to them to entice them to pay the correct amount of taxes,” he added.

He pointed out that the standard deduction would also simplify the taxation system for this group of taxpayers.

Based on estimates made by the Department of Finance, Javier said the increased tax exemptions would result in a revenue loss of P11.5 billion, while the simplified taxation scheme for self-employed individuals would bring in an additional P14.2 billion, or a net gain of P2.7 billion for the government. – Jess Diaz