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Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular Session

HOUSE BILLNO.__ 4992

Introduced by Representative Raul V. Del Mar

EXPLANATORY NOTE

Article VI, Section 28 (1) of the 1987 Constitution states that the rule of taxation
shall be uniform and equitable, and that Congress shall evolve a progressive
system of taxation.

To give flesh to this noble intent of the fundamental law, Congress, in 2008,
passed Republic Act (RA) No. 9504, providing, among others, for the exemption
of minimum wage earners from the payment of income tax on their taxable
income. Laudable as the amendments introduced by RA No. 9504 may be, it still
overlooked the situation where a minimum wage earner is discouraged to seek
promotion for the simple reason that, with said elevation in rank and the
corresponding increase in salary, he will no longer be tax exempt and, what is
worse, his tax liability is more than his wage increase such that his take home
pay is drastically reduced.

To illustrate, a minimum wage eamer, who receives a salary of P486.00 per day
or P145,392.00 per annum, is exempt from payment of income tax by virtue of
RA No. 9504. However, under the present income tax system, if he is promoted
and paid more at P516.00 per day (increase of P50.00) or P160,992.00 per
annum (increase of P15,600.00). he ceases to be a minimum wage earner and is
henceforth liable to pay income tax in the sum of P16,698.40, which is
lamentably higher by P1,098.40 than the salary increase he has acquired
Indeed, his promotion ironically yields him a smaller pay of P144,293.60 per
annum as compared to what he used to have as a minimum wage earner.


This bill aims to address this problematic situation by amending for the purpose
Section 24 (A) (2) of the NIRC of 1997, as amended. Accordingly, the measure
proposes that the taxable income of an individual amounting to P100,000.00 and
less shall be exempt from income tax with only the excess of said exempt
amount to be taxed in accordance with the current tax schedule as provided in
said section of the tax code. Hence, under this proposal, the abovementioned
promoted compensation income earner remains free from income tax liability
even though he is no longer a minimum wage earner, and fully enjoys his
additional disposable income for his basic needs and those of his family.
Otherwise put, the bill’s grant of an additional P100,000.00 exemption allows a
non-minimum wage earner to claim a minimum P150,000.00 to a maximum
P250,000.00 total exemption, depending on the number of dependents allowed
as additional exemption.

By doing this, a minimum wage earner shall not anymore shy away from taking a
promotion as the proposed additional P100,000.00 exemption provides sufficient
“buffer” to avoid the salary distortion that would otherwise ensue.

Further, the bill provides that, in order to keep up with inflation and prevent
erosion of the purchasing power of workers’ wages, the exempt taxable income
amount of P100,000.00 shall be adjusted to its current value using the Consumer
Price Index (CPI) as published by the National Statistics Office (NSO) not later
than three (3) years after effectivity and every three (3) years thereafter.

Accordingly, passage of the measure is earnestly sought.

REP. RAUL V. DEL MAR


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SIXTEENTH CONGRESS
Second Regular Session

HOUSE BILL NO. 4992

Introduced by Representative Raul V. Del Mar

AN ACT EXEMPTING THE TAXABLE INCOME OF AN INDIVIDUAL
AMOUNTING TO P100,000 AND LESS, AMENDING FOR THE PURPOSE
SECTION 24 (A) (2) OF THE NATIONAL INTERNAL REVENUE CODE OF

1997, AS AMENDED
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:

"SEC. 24. Income Tax Rates. —
(A) xxx
(1) xxx
(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:]


(B)
(C)

THE TAXABLE INCOME OF AN __ INDIVIDUAL
AMOUNTING TO P100,000 AND LESS SHALL BE
EXEMPT FROM INCOME TAX. THE TAXABLE INCOME
OF AN INDIVIDUAL IN EXCESS OF THE EXEMPT
AMOUNT OF P100,000 SHALL BE TAXED 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 P500+10% of the excess
‘over P10,000

‘Over P30,000 but not over P70,000 P2,500+15% of the excess
‘over P30,000

‘Over P70,000 but not over P140,000 P8,500+20% of the excess
‘over P70,000

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

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

‘Over P500,000 P'125,000+32% of the excess
‘over P500,000

Xxx
XXX

PROVIDED, FINALLY, THAT NOT LATER THAN THREE
(3) YEARS AFTER THE EFFECTIVITY OF THIS ACT AND
EVERY THREE (3) YEARS THEREAFTER, THE EXEMPT
TAXABLE INCOME AMOUNT OF P100,000 HEREIN
STATED SHALL BE ADJUSTED TO ITS PRESENT VALUE
USING THE CONSUMER PRICE INDEX, AS PUBLISHED
BY THE NATIONAL STATISTICS OFFICE (NSO).

Xxx

Xxx"

SEC. 2. 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. 3. 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. 4. Repealing Clause. - All laws, acts, presidential decrees, executive

2


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.

SEC. 5. Effectivity Clause. - This Act shall take effect fifteen (15) days after its
complete publication either in the Official Gazette, or in at least two (2)
newspapers of general circulation.

Approved,