Solon Seeks Lower Individual Income Tax Based on Present Consumer Price Index

A vice chairman of the House Committee on Ways and Means is the latest lawmaker to push for the reduction of the income tax of an individual taxpayer to be based on the current Consumer Price Index (CPI).

Rep. Raneo E. Abu (2nd District, Batangas) said his proposal aims to give every ordinary Filipino individual taxpayer the equity he deserves in the country’s tax laws, which will put him and the family he supports in a better position to cope with life’s daily financial demands.

“By doing this much-needed fair tweaking of the individual income tax brackets, together with the amounts of personal and additional exemption, in accordance with current CPI and automatically after every three years thereafter, this government can rightfully claim that it has done justice to every ordinary Filipino working man,” said Abu.

Abu explained that since the National Internal Revenue Code (NIRC) of 1997 became effective on January 1, 1998, the individual income tax rates have unfortunately remained based on the 1998 CPI of 67.8 percent, which has now doubled to its current rate of about 141 percent as of August 2015.

“Going by these figures, a regular salaried man’s monthly take home pay of P10,000 way back in 1998 is now equivalent to P20,500 which rightly should be taxed at the rate of just five percent and not a higher one,” said Abu.

In more practical terms, Abu said the amount of tax on someone with a monthly salary of P20,500 should just be P1,025 and not P1,550, giving him an added monthly take-home pay of P525 or P6,300 yearly.

“With the constantly rising prices of basic commodities, this additional income will certainly go a long way in making ends meet for him and his family,” said Abu, also a vice chairman of the Committees on Inter-Parliamentary Relations and Diplomacy, on Housing and Urban Development, and on Public Order and Safety.

In House Bill 6258, Abu sought the amendment of Section 24 of the NIRC of 1997, as amended, pertaining to income tax rates, so that the rates of tax on taxable income of individuals shall be computed in accordance with and at the rates established in the following schedule: those earning not over P20,500, the income tax shall be five percent; over P20,500 but not over P61,500, the tax shall be P1,025 plus 10 percent of the excess over P20,500; over P61,500 but not over P143,500, the tax shall be P5,125 plus 15 percent of the excess over P61,500; over P143,500 but not over P287,000, the tax shall be P17,425 plus 20 percent of the excess over P143,500.

In addition, those earning: over P287,00 but not over P512,500, the tax shall be P46,125 plus 25 percent of the excess over P287,000; over P512,500 but not over P1,025,000, the tax shall be PP102,500 plus 30 percent of the excess over P512,500; and over P1,025,000, the tax shall be P256,250 plus 32 percent of the excess over P1,025,000.

The bill provides that not later than three years after the effectivity of the Act and every year three years thereafter, each net taxable income level and nominal tax rate herein stated shall be adjusted to its present value using the Consumer Price Index, as published by the National Statistics Office (NSO).

The bill also seeks the amendment of Section 35 of the NIRC of 1997, as amended, on allowance of personal exemption for individual taxpayers so that not later than three years after the effectivity of the Act and every three years thereafter, the amounts of basic personal exemption and additional exemption for dependents herein stated shall be adjusted to present values using the CPI, as published by the NSO.

SOURCE: Media Relations Service, Public Relations and Information Bureau