DOF proposes raising income tax exemption ceiling to P350,000
The Department of Finance has proposed new income tax brackets and a higher exemption threshold to ease the financial burden on middle-income earners.
Following President Ferdinand "Bongbong" Marcos Jr.'s call during his fifth State of the Nation Address to grant relief to middle-class workers, House Speaker Faustino "Bojie" Dy III and House Majority Leader Ferdinand Alexander "Sandro" Marcos filed House Bill No. 10345.
The bill seeks to formalize the P350,000 tax-exempt ceiling—offering eligible workers up to P17,500 in annual tax savings. It lowers the income tax rate to 15 percent for individuals with annual taxable income of more than P350,000 but not over P450,000. Higher-income earners will continue to be taxed under the existing graduated rates of 20 percent, 25 percent, 30 percent, and 35 percent, depending on their income bracket.
Those earning over P450,000 up to P800,000 will pay P15,000 plus 20% of the amount exceeding P450,000. Annual incomes over P800,000 up to P2 million will be taxed at P85,000 plus 25% of the excess over P800,000, while those earning over P2 million up to P8 million will pay P385,000 plus 30% of the excess over P2 million. Those earning above P8 million will pay P2.185 million plus 35% of the excess over P8 million.
The measure preserves existing rules for married taxpayers, minimum wage earners, self-employed professionals under the 8% tax regime, and mixed-income earners. alongside complementary relief proposals that include eliminating the minimum corporate income tax for microenterprises and granting tax amnesty on unpaid income, estate, donor's, and value-added taxes with their associated penalties.
To offset the losses from these tax relief measures, DOF Undersecretary Karlo Fermin Adriano detailed revenue-generating proposals under the agency's ProGRESS bill.
The plan boosts excise taxes on sweetened beverages to P20 per liter for sugar-sweetened drinks and P40 per liter for high-fructose corn syrup beverages, standardizes e-cigarette and novel tobacco taxes to P72.90 alongside a P150 excise tax per device with annual 5% increases starting in 2028, and levies a P150 per kilogram tax on plastic packaging like shopping bags, garbage bags, and sachets.
According to Adriano, these tax reform measures are expected to generate P518.71 billion in revenues from 2027 to 2030, more than enough to offset the estimated P326.92 billion in revenue losses from the tax relief measures. This would leave the government with a net revenue gain of P191.77 billion.
