The Senate on Tuesday has approved its version of the tax reform package which is expected to exempt approximately 99 percent or 6.8 million income taxpayers from paying high-income tax rates.
Voting 17-1, the Senate has affirmed on its third and final reading the Senate Bill 1592 or the Tax Reform for Acceleration and Inclusion (TRAIN) bill.
Under the measure, 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.
Senator Sonny Angara, the sponsor of the bill and chairman of the ways and means committee, said that it is a ‘historic’ and the ‘biggest’ income tax relief for public and private workers.
“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 [We want to have an equal income tax system that served injustices throughout the years],” 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.
Moreover, the government can generate up to P130 billions of additional revenue from the Senate version of TRAIN based on the estimates of the Department of Finance (DOF).
Senate President Koko Pimentel, meanwhile, said the reforms on tax policy and tax administration are necessary to raise funds for its long-term investments in 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,” Pimentel said.
Under the bill, 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 joint public hearings and consultations with various stakeholders to come up with a ‘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.