Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

House BILL no, 4696

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

EXPLANATORY NOTE

The typical Filipino eams a minimum wage of Php 466 a day. But a typical family
needs Php 1,200 a day to live. And when the state taxes what little a salaried man
eams with a tax base that was set when commodities were cheaper, we are
burdened with the dilemma of trying to fit what remains in our pockets. As a new
leadership sits at the helm of our country, the need for change is more evident than

ever.

18 years since the Tax Code of 1997 was created, the country's personal income tax
system remained unchanged. Inflation has driven Filipinos into higher tax income
brackets and wage earners are inconvenienced with higher tax liabilities. And
despite the Constitution providing that our rule on taxation should be equal and fair,
we fail to realize that the longer we maintain this lack of foresight for progression, the
more we stay behind with the backward views that plagues our government system

To be equitable, as the Constitution provides its citizens, is to be fair. In order for our
tax system to evolve into a setup that is progressive and just, it demands a reform
that allows the Filipino taxpayer to pay according only to their ability to pay. Although
the growth in the salary of the average Filipino over the years has doubled, this is
merely due to the inflation that rises alongside consumer prices while the rate of tax
remained anchored on the 1998 Consumer Price Index of 67.8%. This resulted in the


increase in tax bases of the average Filipino— tax bases which hasn't changed since
1986. As the prices of basic commodities increase (Consumer Price Index has
reached 141% in August 2015), we shoulder this rise in cost to pay for necessities
while our salary suffers along with unjust tax cuts, A person’s spending power
lessens despite the need to make ends meet.

For the longest time, there has been a need to adjust the tax bases according to the
inflation in the current market. But the National Internal Revenue Code of 1997, and
the absence of its amendment, has hindered the opportunity to do so. This bracket
creep is the result of the lack of initiative from legislators to counter this eventuality.
The time to restructure the current state of tax regulation in our country is long
overdue, especially as our nation is moving towards inclusive growth. Without a tax
reform to combat the fluctuation that the national economy constantly experiences
and help the average Filipino to live in comfort and content, change in this country is

implausible.

This bill seeks to amend Section 24 of Republic Act No. 8424, also known as the
National Internal Revenue Code of 1997, as amended by R.A. No. 9504, to adjust
the levels of net taxable income with a simpler, standardized rates that is just and
fair. It aims to restructure the income brackets and their corresponding tax rates, as
well as align the maximum tax rate of corporate taxpayers. Finally, it aims to
establish an adjustment and index mechanism to reflect the fluctuating commodity

market.

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

bh.

Luig MUND “LR

F. VILLAFUERTE, JR.


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO. 4696

Introduced by HON. LUIS RAYMUND “LRAY” F. VILLAFUERTE, JR.

AN ACT AMENDING SECTION 24
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 the House of Representatives of the
Philippines in Congress assembled:

SECTION 1. Title. This Act shall be known as the “Tax Reform Act”

SEC. 2. Section 24 of the National Internal Revenue Code of 1997, as amended, is
hereby further amended to read as follows:

SEC. 24. Income Tax Rates. —

(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien of
the Philippines, ~

(1) An income tax is hereby imposed:

(a) On the taxable income defined in Section 31 of this Code, other
than income subject to tax under Subsections (B), (C) and (D) of this
Section, derived for each taxable year from all sources within and
without the Philippines by every individual citizen of the Philippines
residing therein;

(b) On the taxable income defined in Section 31 of this Code, other
than income subject to tax under Subsections (B), (C) and D) of this
Section, derived for each taxable year from all sources within the


Philippines by an individual citizen of the Philippines who is residing
outside of the Philippines including overseas contract workers referred
to in Subsection (C) of Section 23 hereof; and

(c) On the taxable income defined in Section 31 of this Code, other
than income subject to tax under Subsections (B), (C) and (D) of this
Section, derived for each taxable year from all sources within the
Philippines by an individual alien who is a resident of the Philippines.

(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:

[Not over P10,000 5%

Over P10,000 but not over P30,000. PS00 + 10% of the
excess over P10,000

Over P30,000 but not over P70,000 sists P2500 + 15% of the
excess overP30,000

Over P70,000 but not over P140,000. aa --. P8,500 + 20% of the
excess overP70,000

Over P140,000 but not over P250,000 P22,500 +25% of the
excess overP 140,000

Over P250,000 but not over P500,000 . P50,000 +30% of the
excess overP250,000

Over P500,000...... a o P125,000+32%of the
excess overP500,000]

TAX SCHEDULE 2018

Not over P250,000 ‘ a 0%

Over P250,000 but not over P400,000 20% of the

excess over P250,000

Over P400,000 but not over P800,000 . P30,000 + 25% of the
excess over P400,000

Over P800,000 but not over P2,000,000. P130,000 + 30% of the


excess over P800,000

Over P2,000,000 but not over P5,000,000 s+ P490,000 + 32% of the
Excess over P2,000,000

Over P5,000,000 0.0... sce eee ase P1,450,000 + 35% of the
excess over P5,000,000

TAX SCHEDULE 2019

Not over P250,000 ...........cc cee a oy 0%

Over P250,000 but not over P400,000 ......... .. 15% of the excess

over P250,000

Over P400,000 but not over P800,000 P22,500 + 20% of the
excess over P400,000

Over P800,000 but not over P2,000,000 .... P102,500 + 25% of the
excess over P800,000

Over P2,000,000 but not over P5,000,000 ........... P402,500 + 30% of the
excess over P2,000,000

Over P5,000,000 isssissrcetcsrises stein sessee P1,302,500 + 35% of the
excess over P5,000,000

PROVIDED, THAT AFTER 2019, THE TAXABLE INCOME LEVELS IN THE
ABOVE SCHEDULES SHALL BE ADJUSTED ONCE EVERY FIVE (5)
YEARS THROUGH RULES AND REGULATIONS ISSUED BY THE
SECRETARY OF FINANCE, UPON RECOMMENDATION OF THE
COMMISSIONER, AFTER CONSIDERING AMONG OTHERS, THE EFFECT
ON THE SAME OF THE FIVE-YEAR CUMULATIVE INFLATION RATE.

For married individuals, the husband and wife, subject to the provision of
Section 51 (D) hereof, shall compute separately their individual income tax
based on their respective total taxable income: Provided, That if any income
cannot be definitely attributed to or identified as income exclusively earned or
realized by either of the spouses, the same shall be divided equally between
the spouses for the purpose of determining their respective taxable income.

[Provided, That minimum wage earners as defined in Section 22 (HH) of this
Code shall be exempt from the payment of income tax on their taxable
income: Provided, further, That the holiday pay, overtime pay, night shift


differential pay and hazard pay received by such minimum wage eamers shall
likewise be exempt from income tax.]

SEC. 3. Implementing Rules and Regulations. - The Secretary of Finance shall,
upon the recommendation of the Commissioner of Internal Revenue, promulgate
upon the effectivity of this Act the necessary Rules and Regulations for its effective
implementation.

SEC. 4. Separability Clause. - If any provision of this Act is subsequently declared
invalid or unconstitutional, other provisions hereof which are not affected thereby
shall remain in full force and effect.

SEC. 5. Repealing Clause. - All other laws, acts, presidential decrees, executive
orders, issuances, presidential proclamations, rules and regulations or parts thereof,
which are contrary to and inconsistent with any provisions of this Act are hereby
repealed, amended or modified accordingly.

SECTION 6. Effectivity Clause. — This Act shall take effect fifteen (15) days after its
complete publication in the Official Gazette or in at least two (2) newspapers of

general circulation.

Approved