Villanueva Wants to Increase Workers’ Take-Home Pay

Senate Bill No. 1062 or An Act Restructuring the Income Tax Imposed on Individuals seeks to amend the Tax Code and adjust the personal income tax structure.

“The failure to adjust the personal income tax structure since 1997 led to rising tax burden among Filipinos. The absence of regular adjustment has pushed taxpayers into higher tax brackets resulting to workers paying a larger portion of their incomes to the government,” the senator explained.

Villanueva further said the greater share in taxes of Filipino wage and salary earners is one of the reasons why there has been a demand to increase the workers’ wages or salaries.

Pulse Asia Research Inc. recently released a nationwide survey which shows that 46 percent of 1,200 respondents cited increasing workers’ pay as their most urgent concern. The survey was conducted from September 25 to October 1.

“Hindi sapat ang pagtataas ng kita ng ating manggagawa kung hindi natin irereporma ang ating sistema ng pagbubuwis. Panahon na po para ibalik sa ating taumbayan ang karamihan ng kanilang kinikita nang sa gayon ay mas mapalakas din natin ang kakayahan nilang gumastos para sa kanilang mga pangangailangan,” Villanueva said.

In his bill, Villanueva proposes an income tax rate of five percent for individuals who earn no more than P22,200 annually.

The present system of the Bureau of Internal Revenue imposes a tax rate of five percent for individuals who earn no more than P10,000 a year.

For individuals earning over P22,200 but not over P66,600, Villanueva is proposing a tax of P1,100 plus 10 percent of the excess of P22,200 while those earning over P66,600 but not over P155,400 will be charged P5,550 plus 15 percent of the excess of P66,600.

If the annual compensation is over P155,400 but not over P310,800, the proposed rate is P18,870 plus 20 percent of the excess of P155,400 while for those who earn over P310,800 but not over P555,000, the proposed rate would be P49,950 plus 25 percent of the excess of P310,800.

Moreover, if an individual earns over P555,000 but not over P1,110,000, the proposed rate would be P111,000 plus 30 percent of the excess of P555,000.

Individuals who earn over P1,100,000 annually would be taxed P277,500 plus 32 percent of the excess over P1,100,000.

Villanueva said the Philippines has one of the highest top marginal tax rates among members of the ASEAN at 32 percent. In addition, the country also imposes a higher tax rate at a lower taxable income.

One of the examples is an effective tax rate of 25 percent imposed in the Philippines at a taxable income of P500,000. In contrast, among the six largest ASEAN economies, the same income is taxed at a lower effective tax rate ranging from zero in Singapore to 20 percent in Vietnam.

“Our country should not be left behind our richer ASEAN neighbors. What we need is a taxpayer-friendly system that would give more purchasing power to our workers. If the passage of this bill will be certified as urgent, concerns on wages will be alleviated and our workers will receive a higher take home pay” Villanueva said.

Meanwhile, the Senate Committee on Ways and Means chaired by tax reform advocate Senator Sonny Angara and vice-chaired by Senator Villanueva, will conduct a hearing on Oct. 25, Tuesday at 10am to tackle the tax package proposal of the Department of Finance and the 14 related Senate bills reforming our tax system.