To help ease the financial burden on Filipino workers, the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) are proposing higher ceilings for tax-exempt benefits in both the private and public sectors.
The move is in line with President Ferdinand R. Marcos Jr.’s directive to lighten the load on taxpayers and strengthen social protection measures for Filipino families. It also supports the administration’s broader goals of inclusive growth, better labor conditions, and improved worker welfare.
‘These changes are not just about numbers-they are about fairness and dignity in the workplace. Every Filipino worker deserves to benefit from the nation’s growth,’ President Marcos Jr. said in his departure statement before flying to Malaysia for the 47th ASEAN Summit and Related Summits on October 25, 2025.
Finance Secretary Ralph G. Recto said the proposed adjustments are meant to allow workers to bring home more of their earnings.
‘Lagi po nating hangarin na mapagaan ang pasanin ng mga taxpayers. Sa proposal na ito, gusto nating maramdaman talaga ng taumbayan ang ginhawa dahil mas lalaki ang maiuuwi nilang kita at matutulungan nitong maibsan ang gastusin nila sa araw-araw,’ Recto said.
He added that the increases would have ‘minimal impact on government revenues but will definitely make a significant difference for our workers.’
Proposed Adjustments
Under the proposal, both private and government employees will receive higher non-taxable allowances and benefits to reflect inflation and rising living costs, while maintaining fiscal prudence.
Among the key changes are:
* Monetized Vacation Leave Credits (Private Sector): Tax-exempt limit to rise from 10 days to 12 days. The current uncapped benefit for government workers’ monetized vacation and sick leave will be retained.
* Medical Allowance for Dependents: From P1,500 to P2,000 per semester
* Rice Subsidy: From P2,000 to P2,500 per month or its market equivalent.
* Uniform and Clothing Allowance: From P7,000 to P8,000 per year
* Actual Medical Assistance: From P10,000 to P12,000 per year
* Laundry Allowance: From P300 to P400 per month
* Employee Achievement Awards: From P10,000 to P12,000 per year
* Christmas or Anniversary Gifts: From P5,000 to P6,000 per year
* Meal Allowance for Overtime or Night-Shift Work: Tax-free limit raised from 25% to 30% of the minimum wage
* CBA and Productivity Incentives: Combined ceiling increased from P10,000 to P12,000 per year
Simplifying Tax
Compliance
Recto also directed the BIR to study possible exemptions for certain taxpayers from the requirement to withhold and remit creditable withholding taxes. The DOF and BIR are exploring ways to simplify and lower applicable withholding tax rates to reduce compliance costs for employers and workers alike.
President Marcos Jr. reaffirmed the government’s commitment to transparency and fairness in tax collection. He said the BIR will recalibrate its priorities to ensure accountability among officials and contractors found complicit in irregularities, particularly in flood control projects.
‘We will uphold fairness in our tax system. We assure our micro, small, and medium enterprises and large corporations who have been lawfully paying their taxes, that you will be treated justly,’ the President said.