EXPLAINER: What Marcos' proposed tax reforms mean for workers, businesses, and taxpayers

President Ferdinand Marcos Jr. has proposed expanding tax relief to benefit more Filipinos.

During his fifth State of the Nation Address (SONA) on July 27, Marcos urged Congress to pass legislation that would expand income tax exemptions, remove corporate income tax for qualified small enterprises, and grant tax amnesty for certain unpaid taxes.

Among those expected to benefit are employees earning up to P350,000 a year.

Under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, only individuals with annual taxable income of up to P250,000 are exempt from paying income tax. Those earning beyond the threshold are subject to graduated income tax rates.

Marcos wants to raise the tax-exempt threshold to P350,000, allowing more workers to keep a larger portion of their earnings.

For instance, under the existing BIR tax schedule, an employee with an annual taxable income of P350,000 pays about P15,000 in income tax each year. If the proposal is enacted, that employee would no longer have to pay income tax.

On July 28, Senate President Pro Tempore Vicente Sotto III filed Senate Bill No. 2338, or the Expanded Income Tax Exemption of 2026, which seeks to increase the income tax exemption threshold to P350,000 beginning January 1, 2027.

Small businesses are also expected to benefit under Marcos' proposal.

Under the CREATE MORE Act, most corporations pay a 25% corporate income tax, while qualified small corporations with a net taxable income of not more than P5 million and total assets not exceeding P100 million pay 20%.

If approved by Congress and signed into law, qualified small enterprises will be exempt from paying corporate income tax.

Another group that could benefit are taxpayers with outstanding tax obligations.

Marcos proposed a tax amnesty covering unpaid estate tax, income tax, donor's tax, and value-added tax (VAT).

The proposed amnesty would also cover penalties, surcharges, and interest.

House Committee on Ways and Means chairperson and Marikina 2nd District Rep. Miro Quimbo said the expanded income tax exemption would effectively serve as a "wage hike" for middle-income earners.

Because eligible workers would be exempt from paying income tax, they would enjoy higher take-home pay even if their basic salaries remain unchanged, the lawmaker said.

"We passed the TRAIN Law exempting those earning P250,000 annually from income tax in 2018. If you adjust it to inflation, of course the worth of the peso in 2018 is different today," Quimbo said in an interview with Super Radyo dzBB on July 28.

"It costs lower. So when you adjust that P250,000 to inflation, it [the threshold] should be P320,000. But the President took the extra step and made it P350,000 so more people would be able to benefit from it," he added. –VBL, GMA News