REPRESENTATIVES:
| RECEIVED
Republic of the Philippines ' 04 AUG 2016
ES

HOUSE OF REPRESENTATIV!
Quezon City Metro Manila |

SEVENTEENTH CONGRESS
First Regular Session —_ |

House Bill 2544

RATION UNIT
SND INDEX SERVICE

Introduced by REP. ENRICO A. PINEDA and REP. MICHAEL ODYLON L, ROMERO

Explanatory Note

Personal income tax rates were pegged a generation and four presidents ago, when prices
of goods were half theirs today. The 1997 peso is worth 45 centavos at present, meaning a
basket goods in 1997 will cost more than double today.

This succinctly illustrates why tax rates should be adjusted now, to account for inflation.
When the current personal income tax rates were imposed almost two decades ago, one of the
key considerations used was the peso’s purchasing power of that time.

With that yardstick, lawmakers then knew what would be the fair and just tax bite, which
when deducted from income would leave the earner a decent wage,while it was provided that
the purpose of taxation is not to bankrupt the payer but for him to make a contribution for the
common good but one that is commensurate with his income.

Such careful calibration is needed because taxation, when it becomes excessive, punishes
industry and deters honest wealth creation, A wise man had used a more colorful language in
warning against aggressive revenue-taking, comparing high taxes to legalized robbery.

If taxpayers, however, feel they are robbed, regularly every end of the month, which is
when taxes withheld are taken from paychecks as the law has provided, they then may have a
basis to feel so. ‘The culprit, however, is understandably known to them ~ outdated tax rates

The 1987 Constitution, however, states that they should be immune from excessive
taxation. “The rule of taxation shall be uniform and equitable,” the basic law commands. It then
orders Congress to “evolve a progressive system of taxation.”

‘The latter simply means that tax rates imposed must be based on the person’s ability to
pay. Sadly, the tax brackets used in computing individual taxes have long ceased to pass that
important test.Our highest top rate of 32 percent does not only contravene the exhortation of the
Constitution, it also goes against global practices in which taxes are tempered to encourage
growth,

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 shrink the number of tax brackets from seven to five. It
sets the lowest tax bracket at P70,000 taxable incomes, safely placing minimum wage workers in
the no-tax zone.


To shield the government from whatever fiscal disturbance this measure would cause, it
spreads out the reduction over three years. It also provides for indexation or automatic
adjustment of the tax schedule every 5 years using the CPT as basis ~ to prevent tax rates from
being fossilized due to government aversion to adjust them.

Hence, we appeal Congress to pass this urgent bill on a timely manner.

ENRICO A, PINEDA (AEL ODYLON L. ROMERO


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City Metro Manila

SEVENTEENTH CONGRE!
First Regular Session

2544

House Bill

Introduced by REP. ENRICO A. PINEDA and REP. MICHAEL ODYLON L. ROMERO

AN ACT

PRESCRIBING NEW RATES OF TAX ON TAXABLE INCOME OF
INDIVIDUALS, AMENDING FOR THE PURPOSE SECTION 24 OF THE

NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR

OTHER PURPOSE:

Be it enacted by the House of Representatives 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:

"Sec. 24. Income Tax Rates. -

"(A) Rates of Income Tax on Individual Citizen and Individual Resident Alien 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 thefollowing schedule;

BEGINNING 5 : BEGINNING
TAXABLE INCOME | JANUARY 1, | BEGINNINGIANUARY | january 1,
2017 , 2019
NOT OVER P70,000 0% ™% 0%
OVER 70,000 BUT 7 y
NOT OVER P200,000 15% 1898 1086
~7. ) P30,000% 20% of | P26,000 + 18% of P20,000 + 15%
Soe rrr psoo ooo | theexcess over | the excess over P200,000_ | ofthe excess over
4 i 200,000 200,000
5 90,000 +25% | PB0,000 23% ofthe | P6S,000 + 20%
ea aye a goo | ofthe excess over | excess over P500,000 | ofthe excess over
£000,000 | ps00,000 500,000
P215,000+32% | P195,000 + 28% of the | P165,000 + 25%
OVER P1,000,000 of the excess over | excess over P1,000,000 | of the excess over
1,000,000 P1,000,000

PROVIDED, THAT EVERY FIVE YEARS (5) 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).”
"[Not over P10,000....... %
“Over P10,000 but not over, “4 P500 + 10% of the excess
30,000 over P10,000
“Over P30,000 but not over ....... P2,500 + 15% of the excess
P70,000 over P30,000,
"Over P70,000, but not over... P8,500 + 20% of the excess
P140,000 over P70,000
"Over P140,000, but not over ......+. P22,500 + 25% of the excess
250,000 over P140,000
"Over P250,000, but not over. P50,000 + 30% of the excess
500,000 over P250,000
“Over P500,000 ..... P125,000 + 32% of the
excess over P500,000]”
“KX,
“xxx

SEC. 2. Implementing Rules and Regulations, The Secretary of Finance shall
promulgate the necessary rules and regulations for the effective implementation of the provisions
of this Act.

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 at least two (2) newspapers of general circulation,

Approved,