THE House of Representatives’ Committee on Ways and Means has approved two State of the Nation Address (Sona) priority tax measures designed to strengthen household purchasing power, ease the financial burden on businesses, and support broader economic growth beginning in 2027.
Filed by Speaker Faustino Dy III and House Majority Leader Ferdinand Alexander ‘Sandro’ Marcos, House Bill 10345 seeks to raise the annual tax-free income threshold from P250,000 to P350,000, while House Bill 10346 proposes to abolish the minimum corporate income tax (MCIT) imposed on domestic corporations.
Marikina Rep. Romero Quimbo, chairman of the House Ways and Means committee, said the panel may consolidate the proposed tax relief measures with corresponding compensatory revenue measures into a single omnibus tax reform package.
The measures follow President Marcos’ call for tax relief during his fifth Sona. They also reflect key elements of the Department of Finance’s proposed ‘Progress Bill,’ or the Promoting Growth, Revenue, and Equity toward Socio-economic Sustainability measure.
Under the Tax Reform for Acceleration and Inclusion Law, individuals earning no more than P250,000 annually have been exempt from personal income tax since 2018. However, years of inflation have weakened the value of this exemption.
HB 10345 would increase the tax-free ceiling by P100,000. Taxable income above P350,000 but not exceeding P400,000 would be subject to a 15-percent rate, while the succeeding marginal rates of 20, 25, 30 and 35 percent would remain.
During the House Committee on Ways and Means hearing, Finance Undersecretary Karlo Fermin S. Adriano said the House proposal would result in an estimated average annual revenue loss of P68.6 billion.
Quimbo said many employees have entered taxable brackets not because they have become significantly wealthier, but because their salaries have struggled to keep pace with inflation.
The unchanged threshold has created what economists call ‘bracket creep,’ in which workers pay higher taxes because of nominal salary adjustments even when their real purchasing power has barely improved.
According to Quimbo, the reform could provide relief to an estimated 4.2 million Filipino workers. Around 1.3 million taxpayers could regain tax-exempt status, while another 1.2 million could become newly exempt from paying personal income tax.
He said the proposal is particularly important for the country’s ‘missing middle’-lower- and middle-income workers who regularly contribute taxes but often do not qualify for government assistance.
HB 10346, meanwhile, would abolish the minimum corporate income tax beginning January 1, 2027.
Under the current system, a domestic corporation generally pays an MCIT equivalent to two percent of its gross income beginning in its fourth taxable year whenever the amount is higher than its regular corporate income tax.
Because the MCIT is based on gross income, a company may still face a tax obligation even when its profit is small or when it experiences legitimate business difficulties.
The proposed reform would require covered corporations to pay the regular corporate income tax based on taxable income. The regular rate is generally 25 percent, while qualified domestic corporations with taxable income not exceeding P5 million and total assets of no more than P100 million are subject to a 20-percent rate.
DOF’s Adriano said the proposed current exemption would cover microenterprises with annual gross sales below P3 million and small enterprises earning between P3 million and P20 million.
The measure could provide an average tax relief of P78,000 per business while reducing government revenue by about P6.6 billion annually.
Adriano clarified that qualified businesses would remain subject to the regular corporate income tax when they earn taxable profits. Medium and large enterprises would also remain covered by the MCIT.