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PRESIDENT Arroyo Tuesday signed a law that exempts more
than half a million minimum-wage earners from tax
payment and increases the level of personal exemption
and deductions of individual taxpayers.
The
measure would cost the government P14.25 billion in
forgone revenues, but Republic Act (RA) 9504, which
amends the National Internal Revenue Code of 1997,
imposes “optional standard deductions”—estimated to
generate P15.03 billion—to make it revenue-neutral.
RA 9504
exempts minimum-wage workers in the private and public
sector from payment of income tax, and also exempts
their holiday pay, overtime pay, night-shift
differential and hazard pay from income tax.
The new
law increases the personal exemption of single taxpayers
from P20,000 to P50,000; head of family, P25,000 to
P50,000; and married, P32,000 to P50,000.
The
deduction for each qualified dependent, not exceeding
four, is increased from P8,000 to P25,000.
To
offset revenue losses, the law allows the use of
optional standard deductions (OSD) in filing business
income-tax returns: a 40-percent maximum deduction of
gross sales or gross receipts in the case of
self-employed and professionals, and a standard
deduction of not more than 40 percent of gross income
for corporations.
According to the Department of Finance (DOF), the OSD
simplifies the filing of income-tax returns and benefits
for professionals and medium, small and micro
entrepreneurs; and is expected “to encourage businesses
in the underground economy to operate above-ground.”
In a
handout given to reporters on the salient features of RA
9504, the DOF said: “Tax compliance is expected to be
enhanced. Government estimates to gain P15.03 billion
from the OSD features.”
Finance
Secretary Margarito Teves said in an interview after the
signing ceremony that the “key challenge” for the
government is to strive to keep the measure
revenue-neutral, considering current pressures brought
about by the global economic slowdown and high oil and
food prices.
Teves
said that when Congress decided to expand the coverage
of the law from just minimum-wage earners to
middle-income earners, which pushed forgone government
revenues from P3.16 billion to P14.25 billion, “we had
to request them to assist us, or help us make sure that
we arrive at a revenue- neutral situation.”
“The
challenge of course is still the implementation—to
generate the additional revenues from the optional
standards from the individuals as well as from the
corporations. But in terms of direction, of course it
will be helpful for the minimum-wage earners and
middle-income earners,” he said.
The
finance chief admitted that attaining the estimated
revenues from the imposition of the OSD “is not going to
be easy so we just have to work very hard on it and we
have to convince our individual taxpayers and
corporations to assist us.”
He
added: “Of course it will help in terms of the
consumers, the taxpayers having more money in their
pocket at the same time; hopefully it will really be
revenue -neutral. So there’s a net addition in terms of
money in circulation and that will help generate jobs
and the economy will also be on the road to some
improvement in the economic growth.” |
