The Senate Ways and Means Committee has endorsed the Palace-proposed Tax Reform for Acceleration and Inclusion (TRAIN) bill, with 21 senators affixing their signatures on the panel’s report submitting the P134-billion revenue package for plenary deliberations.
In seeking early approval of Senate Bill (SB) 1592, Sen. Juan Edgardo M. Angara, committee chairman, said in his sponsorship speech the country needs the comprehensive tax reforms after 20 years, even as he stressed the Senate was acutely aware of the people’s clamor for reforms that do not just impose new taxes but create wealth for ordinary folks.
Angara touted the committee report’s approval of the exemption from taxes of workers earning up to P25,000 monthly, and claimed that under his panels’ version, “99 of taxpayers will enjoy higher take-home pay”.
A total of 21 senators, including Angara, three committee vice chairmen and three ex-officio members, signed the report, which now goes to plenary for debates.
The copy of his sponsorship speech given to the media said the ways and means panel version is estimated to help the government draw in some P134 billion in revenues as a result of various measures. Angara, however, touted the “higher take-home pay” that millions of Filipino workers could benefit from, as the income-tax system is finally amended after 20 years.
Besides Angara, those who signed the report are the panel’s three vice chairmen: Sens. Loren B. Legarda, Joel Villanueva, and Paolo Benigno A. Aquino IV; and the ex-officio members, who all indicated they will introduce amendments after interpellation: Majority Leader Vicente C. Sotto III, Senate President Pro Tempore Ralph G. Recto and Minority Leader Franklin M. Drilon.
As endorsed by the Senate Ways and Means Committee, the first P150,000 annual taxable income will be exempted, while retaining the P82,000 tax exemption for 13th-month pay and other bonuses and the maximum P100,000 additional exemption for up to four dependents. This means an approximate tax-exempt monthly income of P25,000 for workers with four dependents—in line with President Duterte’s campaign promise to exempt workers earning P25,000 and below from income tax.
Based on data from the Bureau of Internal Revenue (BIR), almost all, or 99 percent, of the estimated 7.5 million individual income taxpayers will enjoy lower income tax rates. From the current 2 million tax-exempt minimum wage earners, the proposed new tax scheme will triple the exempt income-taxpayers to around 6 million.
In a statement, Angara assured that “our workers are finally getting the tax relief due them. We have been advocating the reform of our income-tax brackets and rates for several years now to put more money in people’s pockets.”
The senator cited, for instance, that a teacher with two dependents, earning a monthly income of about P17,254, is currently taxed at 20 percent. Under the proposal, he or she will be already exempt and will no longer have to pay taxes. The teacher will be able to take home bigger pay and save roughly P13,176 in annual taxes, or P1,098 monthly savings.
Another example cited by Angara is a call-center agent, with no dependent, earning about P16,136 a month is currently taxed at 20 percent. Under the proposal, his or her current P20,576 annual tax due will be reduced to P4,557 at a lower tax rate of 15 percent, resulting to approximately P16,019 annual savings—close to the call-center agent’s monthly income.
“This is tantamount to giving a 14th-month pay to our countrymen,” he added, noting they will be bringing a bigger take-home pay to their families.
The bill also provided for indexation or automatic adjustment of the income tax schedule every three years so there won’t be any repeat of an outdated and unjust income-tax system where lower-income earners are pushed to higher tax brackets because of inflation.
Moreover, a distinction between the tax treatment of compensation income earners and self-employed individuals and professionals is proposed. Under the Senate version, the 8-percent flat tax on gross sales or receipts is made optional so that self-employed and professionals can choose which tax rate (either 8-percent flat tax or schedular personal income-tax rate) is more favorable to them.
“We introduced an 8-percent flat tax for easier compliance. Hopefully, giving them the choice of which tax regime to follow incentivizes them to pay their taxes correctly,” Angara added. According to BIR data, self-employed and professionals only contribute 15 percent of the total income-
tax collection.
He pointed out that with higher income-tax exemption, marginal income earners—who are self-employed individuals deriving gross sales or receipts not exceeding P100,000—will be exempt from paying income taxes. These include farmers and fishermen, sari-sari store owners, carinderia owners, market vendors and tricycle drivers.
“By automatically exempting them from income tax, in effect, marginal-income earners would finally be afforded equal protection and benefits that the minimum wage earners have long been enjoying,” the senator said.
He added that the value-added tax (VAT) threshold is also raised to P3 million from P1.9 million—exempting small businesses with total annual sales of P3 million and below from paying VAT. Micro, small and medium enterprises represent 98 percent of all registered businesses in the country, Angara said, adding this would provide them due tax relief that would encourage them to grow, and generate more and better jobs for Filipinos.
This developed as members of the Senate Ways and Means panel also endorsed upward adjustments of excise-tax rates on petroleum products.
But unlike the House version’s “3-2-1 formula”, spread out at P3 on the first year starting 2018, P2 by 2019 and P1 in year 2020, the senators opted to reverse the P6.00 tax-hike schedule, as follows: P1.75 in the first year, P2 for the second year and P2.25 by the third year.
The senators, however, opted to retain the tax exemption for kerosene, used for cooking by millions of Filipinos.
The Senate version, embodied in SB 1592, also included a provision suspending imposition of fuel excise taxes when imported oil prices soar to $80 per barrel.