No Tax For Filipinos Earning P21,000 Or Below

INTRODUCTION:

Every individual citizen, alien residing in the Philippines, and every

non-resident alien engaged in trade or business in the Philippines, who is
receiving income, whether it constitutes the sole source of their income or
in combination with salaries, wages, and other fixed or determinable
income, is required to file an income tax return on or before 15 April of each
year covering income for the preceding taxable year. The tax year runs
from 1 January to 31 December of each year. The tax return to be filed
declares the total amount of income earned by the individual and any
unpaid tax is settled at the time the return is filed. A citizen or a resident
alien is not required to file the annual individual income tax return if they
qualify for the substituted filing. A non-resident alien engaged in trade or
business, however, does not qualify for substituted filing.

Tax returns need not be filed by the following categories of individual:

 those earning purely compensation income whose taxable income

does not exceed two hundred fifty thousand pesos (250,000.00
Philippine peso (PHP))
 those whose sole income has been subjected to final withholding tax
such as interest, prizes, winnings, royalties, and dividends
 non-resident aliens not engaged in trade or business on their
compensation income
 minimum wage earners as defined under the Tax Code.
RATIONALE FOR MY INVESTIGATION:

Under a revised proposal, Filipinos with a monthly income of P21,000

or below will be exempted from paying personal income tax, generating
over P21,000 in savings annually.
This is among the tax reform plans included in the first package
crafted and filed by the head of the House ways and means committee in
close coordination with the Department of Finance (DOF).
Finance Undersecretary Karl Kendrick Chua said the revised
Comprehensive Tax Reform Plan (CTRP) Package One under House Bill
(HB) 4774 that was filed by Quirino Representative Dakila Cua retained
DOF-proposed exemptions on the first P82,000 of earnings from the 13th
month pay and other bonuses received by taxpayers.
This will, in turn, increase the threshold for those who will pay zero
tax under the tax reform plan. 
Before Congress' Lenten break, the House ways and means
committee chaired by Cua already agreed in principle to tackle the bill as a
package, which puts to rest concerns that Congress might abandon the
revenue-generating measures of the proposal and only pass the revenue-
eroding portion lowering income tax rates.
"Tax rates for 99% of taxpayers will gradually decrease over the next
few years of implementation under HB 4774," DOF's Chua said
"The simplified tax system will increase the take-home pay of most
individuals, putting more money in people's pockets, which they can use to
save for the future or spend on their families' needs, such as for tuition or
school expenses of their children," he added.
Cua filed HB 4774 seeking changes to the National Internal Revenue
Code last January 17, following extensive consultations with DOF officials
on this tax reform plan.
 HB 4774's proposed amendments to the Tax Code call for the
lowering of personal income tax rates and a corresponding set of measures
to compensate for the revenue losses.
Cua's bill retained the original DOF proposal of exempting those with
a net taxable income of P250,000 and below, but included a provision
exempting the first P82,000 in 13th month pay and other bonuses from the
computation of income tax.
For instance, a call center agent who earns P21,000 a month with a
gross income of P273,000 inclusive of the 13th month pay and other
benefits will still fall under the zero-tax bracket.

PROPOSED CHANGES:

Under the current system, the call center agent, even with two
dependents, would still have to pay P21,867 in income tax because of an
outdated tax structure in which his or her net taxable income of P136,834
would still be taxed P8,500 plus 20% in excess of P70,000.
Chua noted that HB 4774 aims to correct this "income creeping"
through the adoption of a simplified and fairer system where the call center
agent's declared deductions and exemptions of P36,166 – inclusive of the
13th month pay and mandatory contributions – would be deducted from the
gross income of P273,000. 
This will yield for this type of taxpayer a net taxable income of
P236,834, which still falls under the zero-tax bracket, Chua said. 
"Under the tax reform plan, his take-home pay will effectively
increase by P21,867 annually because he would no longer have to pay this
amount of income tax under the current system," Chua explained.
 "This tax policy reform under the bill is among the measures we are
supporting to make the country's tax system simpler, fairer, and more
equitable, especially for the poor and low-income Filipinos," he added.
The revised package under HB 4774 also includes lowering the rates
for estate and donor's taxes, adjusting automobile and fuel excise taxes,
and expanding the value-added tax (VAT) base but retaining the
exemptions enjoyed by senior citizens and persons with disabilities. 
Complementary reforms to this revised tax package include
introducing a sugar-sweetened beverage tax, indexing the motor vehicle
user's charge to inflation, and granting an amnesty to past estate tax
casesl?
The estate tax, which is a tax imposed on the privilege of transferring
ownership of properties upon the death of the owner, will also be reduced
from the current maximum rate of 20% to 6%, under HB 4774. 
The bill also includes administrative reforms in the Bureau of Internal
Revenue (BIR) and Bureau of Customs (BOC) such as fuel marking and
monitoring to prevent oil smuggling, the use of e-receipts, the mandatory
connection of the point-of-sale system of all establishments to the BIR, and
the relaxation of bank secrecy laws for investigating and combating tax
fraud.
Chua said the Duterte administration's target is to ramp up spending
on infrastructure to P1.83 trillion; on education and training to P1.27 trillion;
on health to P272 billion; and on social protection, welfare, and job
generation for the poorest of the poor to P509 billion by 2022. This is a total
public investment budget of P2.2 trillion