SE OF REPRE

RECEIVED
Republic of the Philippines WATE 18 JUL 2016

HOUSE OF REPRESENTATIVES ae

Quezon City TIME: q
ay.
SEVENTEENTH CONGRESS
First Regular Session GERSON GMT
BILLS AND 1

H. B, No,

1656

Introduced by HONORABLE BELLAFLOR J. ANGARA-CASTILLO

EXPLANATORY NOTE

This bill seeks to amend Section 24 of the National Internal Revenue Code of 1997, as
amended, by adjusting the individual income tax brackets and reducing the rates of individual
income tax beginning January 1, 2017.

Article VI, Section 28 (1) of the 1987 Constitution provides that “the rule of taxation shall be
uniform and equitable” and for Congress to "evolve a progressive system of taxation” wherein
the tax rates imposed must be based on the person's ability to pay. However, after almost two
decades, our individual income tax bracket has remained unchanged while the consumer price
index (CPI) has more than doubled already. Bracket creep has pushed middle-income earners
to higher tax brackets even without any “real” increase in their income. Our outdated, unfair and
oppressive tax system has burdened our taxpayers for so long.

The bill is part of a twin measure to reduce the country's Income tax rates for individuals and
corporations in preparation for the Association of South East Asian Nations (ASEAN)
Integration. While the ASEAN Blueprint does not mandate member countries to amend their
income tax schedules, it is highly expected that human capital would flow to where it could earn
best. Next to Thailand and Vietnam, the Philippines have the highest top rate at 32-percent.
When the AEC Declaration was signed in 2007, some member-states began to lower their
corporate and individual income tax rates, with further reductions in the subsequent years.

This bill aims to lower income tax rates across-the-board, reducing the highest tax rate from 32
to 25 percent by 2019, and to compress the tax brackets from seven to five. Given the wage
distortion due to the exemption from tax payment of minimum wage earners, this bill sets the
lowest tax bracket at 70,000 taxable income taking into consideration prevailing minimum
wage

The measure also spreads the reduction over a period of three years in order to buffer the
revenue impact of the individual income bracket adjustments and the reduction of individual
income tax rates. It further provides for indexation or automatic adjustment of the tax schedule
every three years using the CPI so that inflation will not result in tax increases,

It must be stressed that taxation is not just a way for the government to raise revenue; it is also
a means to build a more humane and just society, and to ensure upward mobility. In a highly
unequal society like ours, genuine tax reform that ensures progressive taxation and income
redistribution would promote social justice and would lead to greater equity and economic
growth.

In view of the foregoing, the passage of this bill is earnestly sought.

od ont ANGARA-CASTILLO

Representative
Lone District, Province of Aurora

ENTATIVES:


SEVENTEENTH CONGRESS OF THE )
REPUBLIC OF THE PHILIPPINES —)
FIRST REGULAR SESSION )

1656

H. B. No.

Introduced by HONORABLE BELLAFLOR J. ANGARA-CASTILLO

AN ACT
AMENDING SECTION 24 OF THE NATIONAL INTERNAL REVENUE CODE
OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress assembled:
SECTION 1. Section 24(A)(2) of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

“(A) Rates of Income Tax on Individual Citizen and Individual
Resident Alien of the Philippines. —

“(1) An income tax is hereby imposed:
xX
“(2) Rates of Tax on Taxable Income of Individuals. — The tax shall be

computed in accordance with and at the rates established in the following
schedule:

BEGINNING BEGINNING BEGINNING
TAXABLE INCOME JANUARY 1, JANUARY 1, JANUARY 4,

2017 2018 2019

NOT OVER . os .
70,000 0% 0% 0%
OVER R70,000
BUT NOT OVER 15% 13% 10%
200,000

30,000+ P26,000+ 20,000 +
OVER 200,000 20% of 18% of 15% of
BUT NOT OVER theexcess  theexcess _the excess.
500,000 over R over over

200,000 200,000 200,000

90,000+ R80,000+ — R65,000 +
OVER 500,000 25% of 23% of 20% of
BUT NOT OVER the excess  theexcess _the excess.
81,000,000 over over over

500,000 500,000 500,000
P215,000+  R195,000+ 165,000 +
32% of the 28% of the 25% of the
excess over excess over excess over
21,000,000 —-R1,000,000 ~—-P1,000,000

OVER 1,000,000

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“PROVIDED, THAT EVERY THREE (3) YEARS AFTER THE
EFFECTIVITY OF THIS ACT, THE PRESIDENT OF THE PHILIPPINES SHALL
ADJUST THE AMOUNTS HEREIN STATED TO ITS PRESENT VALUE USING
THE CONSUMER PRICE INDEX (CPI), AS PUBLISHED BY THE PHILIPPINE
STATISTICS AUTHORITY (PSA).”

“XXX,
ee
SEC. 2. Implementing Rules and Regulations. Within thirty (30) days from the effectivity of
this law, the Secretary of Finance shall, upon the recommendation of the Commissioner of
Internal Revenue, promulgate and publish the necessary rules and regulations for the
effective implementation of this Act: Provided, That, the failure of the Secretary of Finance to
promulgate the said rules and regulations shall not prevent the implementation of this Act upon
its effectivity.

SEC. 3. Repealing Clause. All laws, orders, issuances, circulars, rules and regulations or parts
thereof, which are inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

SEC. 4. Separability Clause. If any provision of this Act is declared unconstitutional or invalid,
other parts or provisions hereof not affected thereby shall continue to be in full force and effect.

SEC. 5. Effectivity. This Act shall take effect on January 1, 2017 following its publication in the
Official Gazette or in at least two (2) newspapers of general circulation.

Approved,

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