FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
7 .'U 
-2 1 % -  
OF THE PHILIPPINES 
1 
First Regular Session 
) 
S E N A T E  
k 
Senate Bill No. 
si6;)3. 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
EXPLANATORY NOTE 
Article 2, Section 5 of the Constitution provides that, "The promotion of the 
general welfare is essential for the enjoyment by all people of the blessings of 
democracy." 
Towards this end, the government is mandated to pursue economic 
policies and programs that shall truly uplift the living conditions of the people, 
which can be done by according the public the opportunity to participate in critical 
decision making processes, on one hand, and making them the centerpiece of 
any development initiatives, on the other. Unfortunately, the government fails to 
do these. 
Considering the country's presently dwindling and crippling economy, 
exacerbated by huge budget deficits, it is surprising that the current government 
remains lax in going after erring businessmen and corporations, which rob the 
national coffers of trillions of pesos through their tax evasion schemes, while 
being strict in enforcing income tax payment from the average working people. 
Such a malady makes life more difficult to the average citizen, who is 
forced to doubly work hard to make both ends meet. With a meager income, 75% 
of which is allocated for food provisions, he can hardly meet the demands of daily 
living, as he is even compelled to remit a considerable amount of money to the 
treasury in the form of income tax. 
The proposed measure seeks to pursue equitable tax burden distributions 
and provide tax relief to the disadvantaged sector, who suffers most amidst our 
economic turmoil. Specifically, it seeks to reduce the income tax rates of 
individual taxpayers and grant income tax payment exemption to certain 
minimum wage earners. 
The immediate passage of this bill is earnestly sought. 
I? 
n 
Senator 


FOURTEENTH CONGRESS OF THE REPUBLIC 
) 
?’ 
Jiil -2 I : 
OF THE PHILIPPINES 
1 
First Regular Session 
) 
INTRODUCED BY SEN. JINGGOY EJERCITO ESTRADA 
AN ACT 
AMENDING SECTIONS 24, 31, 34, 35 AND 110 OF 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: 
SECTION 1. Section 24(A) of the National Internal Revenue Code of 
1997, as amended, is hereby further amended to read as follows: 
“SEC. 24. Income Tax Rates. - 
Rates of Income Tax on Individual Citizen and Individual 
Resident Alien of the Philippines. - 
(A) 
“(1) An income tax is hereby imposed: 
“(a) x x x. 
“(b) x x x. 
”(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) SCHEDULE 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,OOO ....................................... 
5%] 
[“Over P I  0,000 but not over P30,OOO ...... . . . ..P500+10% of 
excessover 
P10,000] 
[“Over P30,OOO but not over P70,OOO ._......... 
P2,500+15% 
of excess over 
P30,000] 
[“Over P70,OOO but not over P140,OOO ........ P8,500+20% of 


excessover 
P70,000] 
excessover 
P140,000] 
excess over 
P250,000] 
[“Over P140,OOO but not over P250,OOO ...... P22,500+25% of 
[“Over P250,OOO but not over P500,OOO ..... P50,000+30% of 
[“Over P500,OOO 
P125,000+34% 
of excess over 
P500,OOO in 
19981 
“NOT OVER P144,OOO ............................. 
0% 
“OVER P144,OOO ..................................... 
35% OF THE 
EXCESSOVER 
P144,OOO. 
“Provided, That THE ABOVE SCHEDULE SHALL TAKE 
EFFECT ON JANUARY 01,2007: PROVIDED, FURTHER, THAT 
effective January 1, 2009 [1999], the [top marginal] rate OF 
THIRTY-FIVE PERCENT (35%) shall be REDUCED TO thirty[- 
three] percent (30[33]%). [and effective January 1, 2000, the said 
rate shall be thirty-two percent (32%).] 
“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. 
“x x x.” 
SEC 2. Section 31 of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended to read as follows: 
“SEC. 31. Taxable lncome Defined. - The term “taxable 
income” means the pertinent items of gross income specified in this 
Code, less the deductions [and/or personal and additional 
exemptions, if any,] authorized for such types of income by this 
Code or other special laws.” 
SEC 3. Section 34(L) of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended to read as follows: 
“SEC. 34. Deductions from Gross Income. - Except for 
taxpayers earning compensation income arising from personal 
services rendered under an employer-employee relationship where 
no deductions shall be allowed under this Section other than under 
Subsection (M) hereof, in computing taxable income subject to 
income tax under Sections 24(A); 25(A); 26; 27(A), (B) and (C); and 
28(A)(I), there shall be allowed the following deductions from gross 
income: 


“(A) x x x 
IIX x x. 
“(L) Optional Standard Deduction. - In lieu of the deductions 
allowed under the preceding Subsections, an individual subject to 
tax under Section 24, other than a nonresident alien, may elect a 
standard deduction in an amount not exceeding FORTY [ten] 
percent (40[10]%) of his gross income AS DEFINED IN SECTION 
32 OF THE CODE. Unless the taxpayer signifies in his return his 
intention to elect the optional standard deduction, he shall be 
considered as having availed himself of the deductions allowed in 
the preceding Subsections. Such election when made in the return 
shall be irrevocable in the taxable year for which the return is made: 
Provided, That an individual who is entitled to and claimed for the 
optional standard deduction shall not be required to submit with his 
tax return such financial statements otherwise required under this 
Code: Provided, further, That except when the Commissioner 
otherwise permits, the said individual shall keep such records 
pertaining to his gross income AS DEFINED IN SECTlON 32 OF 
THE CODE during the taxable year, as may be required by the 
rules and regulations promulgated by the Secretary of Finance, 
upon recommendation of the Commissioner.” 
“A 
CORPORATION 
SUBJECT 
TO 
TAX 
UNDER 
SECTIONS 27(A) AND 28(A)(1) OF THE CODE MAY ALSO 
AVAIL ITSELF OF THE OPTIONAL STANDARD DEDUCTION 
PROVIDED IN THE PRECEDING PARAGRAPH.” 
“(M) Premium Payments on Health and/or Hospitalization Insurance 
of an Individual Taxpayer. - x x x. 
‘IX x x.” 
SEC 4. Section 35 of the National Internal Revenue Code of 1997, as 
amended, is hereby deleted. 
[“SEC. 35. Allowance of Personal Exemption for Individual 
Taxpayer.-] 
r(A)ln General. - For purposes of determining the tax 
provided in Section 24 (A) of this Title, there shall be allowed a 
basic personal exemption as follows:] 
[“For single individual or married individual judicially decreed 
as legally separated with no qualified dependents P20,000] 
[“For head of family P25,OOOl 
[“For each married individual P32,OOOl 
[“x x XI 


[“(B)Additional Exemption for Dependents. - There shall be 
allowed an additional exemption of Eight thousand pesos (P8,OOO) 
for each dependent not exceeding four.] 
[“x x x.] 
r(C) Change of Status. - x x x.] 
[x x x.”] 
[(D) Personal Exemption Allowable to Nonresident Alien 
Individual. - xxx.”] 
SEC 5. The succeeding sections of the National Internal Revenue Code 
are hereby renumbered accordingly. 
SEC 6. Section 110(B) of the National Internal Revenue Code of 1997, as 
amended, is hereby further amended as follows: 
“SEC. 110. Tax Credits. 
“(A) Creditable Input Tax. - x x x. 
“(B) Excess Output or Input Tax. - If at the end of any 
taxable quarter the output tax exceeds the input tax, the excess 
shall be paid by the VAT-registered person. If the input tax exceeds 
the output tax, the excess shall be carried over to the succeeding 
quarter or quarters.[: Provided, That the input tax inclusive of input 
VAT carried over from the pervious quarter that may be credited in 
every quarter shall not exceed seventy percent (70%) of the output 
VAT: Provided, however, That] A[a]ny input tax attributable to zero- 
rated sales by a VAT-registered person may at his option be 
refunded or credited against other internal revenue taxes, subject to 
the provisions of Section 112.” 
“x x x. (I 
SEC 7. Implementing Rules and Regulations. -The Secretary of Finance 
shall, upon recommendation of the Commissioner of Internal Revenue, 
promulgate within thirty (30) days from the date of approval of this Act, the rules 
and regulations necessary for the implementation of this Act. 
SEC 8. Separability Clause. - 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. 
SEC 9. Repealing Clause. - Any law, presidential decree or issuance, 
executive order, letter of instruction, administrative order, iule or regulation 
contrary to, or inconsistent with any provision of this Act is hereby repealed or 
modified accordingly. 


SEC I O .  Effecfivify Clause. -This Act shall take effect on January 01, 
2008. 
Approved,