Republic of the Philippines
HOUSE OF REPRESENTATIVE
Quezon City

Seventeenth Congress
First Regular Session

HOUSE BILL No. 4068

Introduced by Representative Manuel F. Zubiri

EXPLANATORY NOTE

In light of the Philippine Constitution’s mandate that “Congress shall evolve
a progressive system of taxation”, Congt faced with the constant challenge of
instituting taxation mechanisms designed to shift the burden of taxation from
who are earning less to those who are earning more. One such
m is the system of mandatory deductions instituted under Republic Act
No. 9504, whereby individual citizens of the Philippines are allowed a mandatory
deduction of PHPS0,000.00 plus an additional mandatory deduction of
PHP25,000.00 for each qualified dependent child up to maximum of four (4)
qualified dependent children. This taxation system of mandatory deductions may
be considered a mechanism for progressive taxation considering that the impact of
any financial benefit afforded by these mandatory deductions on a taxpayer’s
disposable income is more profoundly felt by those who are earning less compared
to those are earning more.

In the setting of the amount of these mandatory deductions, the Supreme
Court declared in a 2016 case! that “personal exemptions are the theoretical
personal, living and family expenses of an individual allowed to be deducted from
the gross or net income of an individual taxpayer. These are arbitrary amounts
which have been calculated by our lawmakers to be roughly equivalent to the
minimum of subsistence, taking into account the personal status and additional
qualified dependents of the taxpayer.” During inflationary times, there is therefore
a need to update the limits of these mandatory deductions for these to accurately
reflect the increasing amounts needed for the subsistence of an individual or a
family. It is therefore incumbent upon Congress to periodically review the levels
of these allowable deductions and determine whether or not these adequately
address the current cost of living in the country. As the last adjustments of these
personal deductions had been made way back in 2008, it is high time that Congress
revisits and revises these mandatory deductions to reflect the present socio-
economic needs of the Filipino taxpayer.

1 Carmelino F, Pansacola v, Commissioner of Internal Revenue, GR. No. 159991, 16 November 2016


This proposed measure seeks to amend Section 35 (A) and (B) of the
National Internal Revenue Code of 1997, as amended, by increasing the current
levels of personal and additional exemptions for individual taxpayers. Through
this measure, it is hoped that the resulting increase in the disposable income of
individual taxp: however slight, would go a long way in helping Filipino
families meet the ever-increasing cost of food, housing, transportation, health,
education and other basic negessities, The expected surge in economic activities
brought about by higher consumption spending by Filipino families with greater
disposable income is expgted to offset the anticipated adverse impact of this
measure upon the nationa/government’s fiscal position,

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


Republic of the Philippines
HOUSE OF REPRESENTATIVES

Quezon City

Seventeenth Congress
First Regular Si n

HOUSE BILL No, 4068

Introduced by Representative Manuel F. Zubiri

AN ACT
INCREASING THE ALLOWABLE PERSONAL AND ADDITIONAL,
EXEMPTIONS OF INDIVIDUAL TAXPAYERS, AMENDING FOR THE
PURPOSE SECTION 35 (A) AND (B) OF REPUBLIC ACT NO. 8424,
OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE
CODE OF 1997, AS AMENDED, AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in
Congress assembled:

S| PION 1. Section 35 (A) and (B) of the National Internal Revenue Code of
1997, as amended, is hereby amended to read as follows:

"SEC. 35. Allowance of Personal Exemption for Individual Taxpayers.

“(A) In General. - For purposes of determining the tax provided in
Section 24 (A) of this Title, there shall be allowed a basic personal
exemption amounting to [Fifty Thousand Pesos (P50,000)} ONE
HUNDRED THOUSAND PESOS (P100,000) for cach individual
taxpayer.

“In the case of married individuals where only one of the spouses is
deriving gross income, only such spouse shall be allowed the personal
exemption

“(B) Additional Exemption for Dependents. - Vheve shall be allowed
an additional exemption of [Twenty-five thousand pesos (P25,000)]
FIFTY THOUSAND PESOS (P50,000) for each dependent not
exceeding four (4).

“The additional exemption for dependent shall be claimed by only one
of the spouses in the case of married individuals.

“In the case of legally separated spouses, additional exemptions may
be claimed only by the spouse who has custody of the child or
children: Provided, That the total amount of additional exemptions


that may be claimed by both shall not exceed the maximum additional
exemptions herein allowed.

“For purposes of this Subsection, a ‘dependent means a legitimate,
illegitimate or legally adopted child chiefly dependent upon and living
with the taxpayer if such dependent is not more than twenty-one (21)
years of age, unmarried and not gainfully employed or if such
dependent, regardless of age, is incapable of self-support because of
mental or physical defe

LATER THAN SIX (6) YEARS AFTER THE
Y OF THIS ACT AND EVERY SIX (6) YEARS
E, ER, THE ALLOWABLE DEDUCTIONS HEREIN
s 'D SHALL BE ADJUSTED TO ITS PRESENT VALUE
USING THE CONSUMER PRICE INDEX, AS PUBLISHED BY
THE PHILIPPINE STATISTICS AUTHORITY. (PSA)”

PION 2. Separability C lause - If any provision of this Act is declared invalid
or unconstitutional, other provisions hereof which are not affected thereby shall
continue to be in full force and effect

SECTION 3. Repealing Clause. - All provisions of law, orders, decrees, executive
orders, including rules and regulations or parts thereof which are contrary to or
inconsistent with the provisions of this Act are hereby repealed or modified
accordingly.

SECTION. 4. Effectivity Clause. - This Act shall take effect fifteen (15) days
following its publication in the Official Gazette or at least two (2) national
newspapers of general circulation

Approved,