Pinoys getting P21k a month won't pay personal income tax under revised tax reform package —DOF

Filipinos with a monthly income of P21,000 will no longer pay personal income tax under the first package of the comprehensive tax reform plan (CTRP) bill pending before the House of Representatives, an official of the Department of Finance (DOF) said Sunday.

DOF Undersecretary Karl Kendrick Chua said the tax exemption will result in a P20,000 annual savings for Filipinos under the P21,000 income bracket.

Chua said the revised CTRP Package One under House Bill 4774 that was filed by Rep. Dakila Carlo Cua, head of the House ways and means committee, retained the DOF-proposed exemptions on the first P82,000 of earnings from the 13th month pay and other bonuses received by taxpayers, which, in turn, increased the threshold for those who will pay zero tax under the tax reform plan.

He said that before the Lenten break, the House panel agreed in principle to tackle the bill as a package.

There were concerns that the bill will be passed by Congress without the proposed revenue-generating measures.

“Tax rates for 99 percent of taxpayers will gradually decrease over the next few years of implementation under HB 4774,” Chua said.

“The simplified tax system will increase the take-home pay of most individuals, putting more money in people’s pockets, which they can use to save for the future or spend on their families’ needs, such as for tuition or school expenses of their children,” he added.

Cua filed HB 4774 seeking various amendments to the National Internal Revenue Code last January 17, following extensive consultations with DOF officials.

The bill aims to amend the Tax Code and calls for the lowering of PIT rates and a corresponding set of measures to compensate for the revenue losses arising from the reduced tax rates. The package also aims to raise funds for the Duterte administration’s public investment program.

The DOF said that Cua’s bill retained its original proposal of exempting those with a net taxable income of P250,000 and below, but included a provision exempting the first P82,000 in 13th month pay and other bonuses from the computation of income tax.

Chua said that under the package, a call center agent who earns P21,000 a month with a gross income of P273,000 inclusive of the 13th month pay and other benefits, will still fall under the zero-tax bracket.

He said that under the current system,  the call center agent, even with two dependents, would still have to pay P21,867 in income tax because of an outdated tax structure in which his net taxable income of P136,834 would still be taxed P8,500 plus 20 percent in excess of P70,000.

The bill, he said, aims to correct this through the adoption of a simplified and fairer system where the call center agent’s declared deductions and exemptions of P36,166--inclusive of the 13th month pay and mandatory contributions--would be deducted from the gross income of P273,000.

“Under the tax reform plan, his take home pay will effectively increase by P21,867 annually because he would no longer have to pay this amount of income tax under the current system,” Chua said.

The revised package under HB 4774 also calls for lowering the rates for estate and donor’s taxes and adjusting automobile and fuel excise taxes. It, however, proposes an expanded value-added tax (VAT) base, but retaining the exemptions for senior citizens citizens and persons with disabilities.

The bill also proposes complementary reforms including the introduction of a sugar-sweetened beverage tax, indexing the motor vehicle user’s charge to inflation, and granting an amnesty to past estate tax cases.

It also includes legislated administrative reforms in the Bureau of Internal Revenue (BIR) and Bureau of Customs (BOC) such as fuel marking and monitoring to prevent oil smuggling, the use of e-receipts, the mandatory connection of the point-of-sale system of all establishments to the BIR, and the relaxation of bank secrecy laws for investigating and combating tax fraud. —ALG, GMA News