President Marcos wants Congress to act on a measure that seeks to recalibrate personal income taxes and provide relief to microenterprises, which he highlighted in his State of the Nation Address (Sona).
‘The president wants the Progress bill to be passed this year, if possible,’ Palace press officer Claire Castro said on Tuesday, referring to the proposed ‘Promoting Growth, Revenue, and Equity toward Socio-economic Sustainability’ (Progress) bill.
In his July 27 Sona, Marcos drew applause when he pushed for the passage of the tax reform measure to ease the financial burden on middle-class workers as well as micro and small enterprises.
The Department of Finance (DOF) is proposing to expand the so-called sin and wealth taxes, while revisiting its earlier plans to tax plastic products and update the motor vehicle road user tax (MVRUT), in a bid to offset the estimated loss of P326.92 billion from the expansion of personal income tax exemptions and exemption of small businesses from the minimum corporate income tax.
The President’s proposed measure is expected to generate P518.71 billion in revenues between 2027 and 2030 to achieve a net fiscal gain of nearly P192 billion.
Exemptions, reduced base
As outlined by the President in his penultimate Sona, the DOF is proposing to raise the minimum annual income tax subject to tax to P350,000 from the current P250,000.
The second and third brackets would also see adjustments, with individuals earning between P350,000 and P450,000 paying 15 percent of the excess over P350,000.
Those earning between P450,000 and P800,000 would also face a reduced fixed base tax of P15,000 plus 20 percent of the excess over P450,000.
Should Congress approve the rationalized tax brackets, income earners above the P350,000 threshold can expect a fixed annual tax saving of P17,500. Meanwhile, earners under the P250,000 to P350,000 bracket can save as much as P15,000 a year.
According to the DOF, raising the annual personal income tax exemption threshold would slash government revenues by P300.33 billion from 2027 and 2030.
Other tax adjustments
On the other hand, exempting micro and small enterprises from the minimum corporate income tax would trim another P26.6 billion in revenues.
The DOF and the Department of Health seek to raise the excise on sweetened beverages to P20 per liter for sugar-sweetened drinks, and P40 per liter for beverages made with high-fructose corn syrup.
The government is also proposing a unified P72.90 excise on e-cigarettes beginning next year, with 5-percent indexation starting 2028.
Vape devices would face a new P150-per-unit excise, while novel tobacco products, such as oral nicotine pouches, would be taxed P72.90 per 2 grams or 2 milliliters.
Excise on distilled spirits would also be increased, with annual indexation of 6 percent beginning in 2031.
The proposal would also remove tax exemptions for soy milk and 100-percent natural fruit and vegetable juices, while extending the levy to products such as ice cream and yogurt.
The DOF also revived its proposal to tax plastic products, including ‘sando’ bags, ‘labo’ bags and sachets, at P150 per kilogram, with annual indexation of 5 percent.
To address unequal taxation, the DOF is pushing for a higher tier for excise on automobiles, which will now include a 75-percent tax rate for vehicles worth more than P8 million and include private jets among nonessential goods subject to excise.
The MVRUT will also be adjusted based on cumulative inflation to fund road maintenance, as rates have not been updated for over two decades.