Senators agree to exempt workers earning P250k and below from income tax

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Metro Manila (CNN Philippines, November 23) — Senators agreed on Wednesday to exempt workers earning P250,000 and below per year from paying income tax starting January 1, 2018.

"We will initially propose it in the third year, gradual, but because Senator Ralph Recto proposed in the first year, we accepted his amendment. So, in full na yung P250,000," Senator Sonny Angara said in an ambush interview, Wednesday.

The initial proposal was to implement the tax exemption gradually for the next three years: those earning P150,000 will exempted in 2018, while those earning P200,000 and P250,000 will be exempted from tax in 2019 and 2020, respectively.

The Senate on Wednesday began the period of amendments for Senate Bill 1592 or the Tax Reform for Acceleration and Inclusion (TRAIN).

The tax reform package, spearheaded by the Duterte administration, aims to lift the burden on low-income earners while raising revenues to help fund the government's ambitious Build, Build, Build infrastructure program. The program forecasts spending of up to P9 trillion in infrastructure projects till 2022.

The Senate's TRAIN bill also retained the exemption on 13th month pay and other bonuses totaling P82,000 pesos, consistent with the House version.

But while some minimum wage earners will get tax breaks, Angara said Senate cannot lower value added tax (VAT) from 12 percent to 10 percent.

Government will not be able to hit revenue targets for its programs if the VAT is lowered, said Angara.

Senator Risa Hontiveros, however, said the proposal to lower the VAT will benefit the poor "who for the longest time have been at the receiving end of a largely regressive tax system."

Hontiveros claimed around 1.8 million near poor wage earners will become poorer even if under the bill  they will receive a  subsidy of P200 per month , because of the different sizes of household families.

Angara and the Finance Department expect P130 billion to P140 billion in revenues during the first year of implementation, which will be allocated for government services and projects.

To generate the revenues, Angara said special laws exempting some items from value added tax will be repealed.

"We're providing  more revenue by lifting the tax exemptions on certain sectors," Angara said. "Maliliit sila, pero marami (These are just small exemptions, but there are a lot). So we will just add it up," he said, adding this is expected to yield P45.5 billion.

He added, documentary stamp taxes, which are applied on bank documents, loan agreements, and other similar documents will be doubled. He said this could add an estimated P40 billion in taxes.

The Senate hopes to start the bicameral conference by the first week of December. This is so President Rodrigo Duterte can sign the package before the year ends.

The TRAIN Bill is part of the Finance Department's Comprehensive Tax Reform Program. It is meant to ease the burden of minimum wage earners paying income taxes, however some critics have criticized it as anti-poor as it may increase taxes on some commodities.

Duterte had previously backed the tax reform plan, which the government is banking on to rake in money for its increased expenditure on infrastructure.

READ: Duterte marks tax reform bill as urgent