Press Release
November 28, 2017

Nearly 7 million workers to be exempt from income tax

The Senate approved on Tuesday its version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which is expected to exempt 6.8 million workers from paying income taxes.

Senate Bill 1592, sponsored by Senator Sonny Angara, chairman of the ways and means committee, was approved on third and final reading with 17 affirmative votes and one negative vote.

The bill was co-authored by Senate President Aquilino "Koko" Pimentel III, Senate President Pro-Tempore Ralph Recto, Senate Majority Leader Vicente Sotto III, Senate Minority Leader Franklin Drilon and Senators Cynthia Villar, Loren Legarda, Richard Gordon, Juan Miguel Zubiri, Joseph Victor Ejercito, Nancy Binay, Paolo Benigno Aquino IV, Francis Escudero, Joel Villanueva, and Sherwin Gatchalian.

The TRAIN is identified by both houses of Congress and the Duterte administration as a priority legislation. The Senate version consolidated 31 Senate bills, three House bills and three Senate resolutions.

Higher take-home pay for public, private workers

Under the Senate-approved SB 1592, the first P250,000 annual taxable income will be exempted from tax, plus the P82,000 tax exemption for 13th month pay and other bonuses. This translates to an approximate tax-free monthly income of P21,000.

With this proposal, based on the data from the Bureau of Internal Revenue (BIR), almost all or 99% of the estimated 7.5 million individual income taxpayers will enjoy lower income tax rates.

Moreover, from the current 2 million tax-exempt minimum wage earners, the bill will triple the exempt income taxpayers to around 6.8 million.

"Sa kasaysayan ng pagbubuwis sa bansa, ito na ang pinakamalaking income tax relief na maipagkakaloob natin sa mga manggagawa. We're putting more money in the pockets of Filipinos. Gusto nating gawing patas ang ating income tax system na naging hindi makatarungan sa pagdaan ng panahon," Angara said.

For instance, a government Teacher I, with a monthly income of P20,179, now pays P28,717 in taxes annually at a rate of 25%. Under the proposed new tax scheme, 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 P2,393 monthly.

Funding the Build, Build, Build program

Based on the estimates of the Department of Finance (DOF), the government can generate up to P130 billion additional revenue from the Senate version of TRAIN.

Pimentel said the reforms on tax policy and tax administration are necessary to raise the funds that government would need for its long-term investments on infrastructure, education and healthcare services.

"Like any investments, we must look beyond the short-term challenges this measure poses and focus on the significant, tangible, and long-term benefits that countless Filipinos today, and in the future, will enjoy," the Senate President said.

Under the Senate-approved tax reform package, 60% of the incremental revenues will go to infrastructure programs, 27% will be allocated to social protection programs including the unconditional cash transfer to the poorest 10 million Filipino families and health, nutrition and anti-hunger programs, while 13% will be allocated to military modernization programs.

The Senate committee conducted numerous and long hours of public hearings and consultations with various stakeholders to come up with a more pro-people tax reform package.

"This is a very comprehensive and ambitious tax reform. We made sure that this long-overdue reform is a product of a collective effort. I thank our colleagues for helping us strike a balance between giving tax relief to our workers and meeting the revenue target so as not to impair the government's capability to finance its programs and projects," Angara said.

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