MORE than 3 million Filipino workers are expected to benefit from the Marcos administration’s proposal to raise the annual personal income tax exemption threshold, a Cabinet official said, even as the government stands to forgo about P60 billion in revenues if the measure is passed by Congress and becomes law.
Finance Secretary Frederick Go told reporters on Wednesday that they “fully support all the reforms and measures mentioned by President Ferdinand Marcos Jr. at the State of the Nation Address as far as it relates to the Department of Finance and its attached agencies” despite the attendant revenue loss.
“For income tax, it (the loss) could be as much as P60 billion,” Go said, adding that an additional P6 billion would be foregone from a corporate income tax exemption for micro and small enterprises.
Still, he said the move would benefit at least 3.13 million workers, including around 1.2 million minimum wage earners who would become exempt from paying personal income tax, raising the total number of tax-exempt workers to about 6.3 million from 5.1 million currently.
“This tax relief measure will put more money directly into the pockets of Filipino workers,” Go said.
Eligible workers earning between P250,000 and P350,000 annually could net up to P15,000 in additional income each year, while those earning P350,000 and above could see a maximum annual increase of P17,500.
Former Finance undersecretary and Chinabank chief economist Domini Velasquez told The Manila Times that the proposal would encourage higher consumer spending and lift the country’s economic growth by an estimated 0.12 percentage point.
“The proposal is expected to boost household consumption by around P45 billion, providing a timely boost to domestic demand and lifting GDP growth,” she said.
The inflationary effect will likely remain limited at around 0.05 percentage point, Velasquez said, as the average tax savings per taxpayer would amount to only about P15,000 annually, or roughly P1,250 a month.
Under the current tax structure, the taxpayer pays P42,500 in income tax each year.
If the tax-free threshold is raised to P350,000 while tax rates remain unchanged, the annual tax bill would decline to P27,500, resulting in annual savings of P15,000.
