GMA commends House for granting tax breaks to wage earners

President Arroyo commended the House of Representatives yesterday for passing a bill that would increase the take-home pay of minimum-wage earners in the public and private sectors by exempting them from paying income taxes.

House Bill No. 5296 seeks to exempt minimum-wage earners from paying income tax and increase personal tax exemptions as part of reforms involving individual taxation. The House passed the measure before congressmen went on Lenten break.

Bunye said Mrs. Arroyo fully supports the bill as this forms part of the administration’s "safety nets" designed to protect the public from the rising costs of basic commodities.

She earlier called for the exemption of low-wage earners from paying income taxes when Congress and businessmen shot down her proposed legislated wage hike.

Other safety nets include lowering the tariff and duties imposed on fuel and the setting up of a chain of convenience stores called "Tindahan Natin" to sell basic commodities such as rice, instant noodles and sugar at prices lower than those charged by commercial outlets for the same products.

"This administration supports social safety nets to protect the people from the pressures arising from socioeconomic dislocation — just as we are doing in the case of oil price hikes and upward trends in the costs of prime commodities," Bunye said.

"The executive (branch) and Congress can be partners both for economic growth and social amelioration if we can only tone down the political noise and focus on our public duties," he added.

HB 5296 provides that workers earning below P55,000 a year will be exempted from tax, as well as the head of the family and those married with two dependents who earn up to P100,000 a year.

The bill also provides that a single taxpayer earning not more than P100,000 a year will be asked to pay P234 in tax, a 97-percent reduction from P7,885 charged under the present tax structure.

Another provision of HB 5296 states that workers with annual taxable income of over P55,000 but not over P100,000 will pay 26 percent of the excess over P55,000; those earning P100,000 but not over P250,000 will pay P11,700 plus 29 percent of the excess over P100,000; those earning over P250,000 but not over P400,000 will pay P55,200 plus 31 percent of the excess over P250,000; those earning over P400,000 but not over P500,000 will pay P101,700 plus 33 percent of the excess over P400,000; and those earning over P500,000 will pay 134,700 plus 35 percent over P500,000.

The bill also raised the amounts of additional exemption allowances as follows: single, from P20,000 to P30,000; head of the family, from P25,000 to P37,500; married, from P32,000 to P48,000; and an additional exemption of P12,000 from P8,000 for each of up to four dependent children.

Tarlac Rep. Jesli Lapus, House ways and means chairman, said the restructuring of the government’s individual taxation system will make it "more equitable and reflective of the true value of our currency and help our wage earners mitigate the adverse effects of the spiraling cost of basic goods and services."

Speaker Jose de Venecia said the House leadership will continue to "find ways and means to instill reforms in our tax system to unburden our masses while maximizing tax collection."

De Venecia and Majority Leader Prospero Nograles attributed the passage of HB 5296 to Lapus’ "responsive and diligent efforts in leading his panel to fine-tune the measure until its plenary passage."

Lapus said the increases in personal exemptions will effectively make tax-exempt a combined family income of P170,000 (assuming that both spouses are earning the highest minimum wage of P85,000 each) with four qualified children.

Under the present system, a family with this net income would be subject to pay income tax of P9,300, he said.

Lapus said the bill addresses the wide disparity among individual income tax payers, particularly between wage earners and the self-employed, or individuals engaged in the practice of their professions.

He cited Bureau of Internal Revenue statistics showing that in 2004, 83.57 percent of individual income taxes were paid by salaried individuals while only 12.26 percent were accounted for by the self-employed.

Lapus said this discrepancy is mainly due to the application of the "modified gross-income tax scheme" and the implementation of the withholding tax system on compensation income.

The former permits the deduction only of personal exemptions and additional deductions for dependents.