" 
SCI1Jit' 
SIXTEENTH CONGRESS OF THE REPUBLIC ), 
{~lf,~£ (If H(l" c~t'l"Trbr~ 
OF THE PHILIPPINES 
) 
Third Regular Session 
) 
°15 
SEP 16 P 2 :40 
SENATE 
s.No.---2953 
Introduced bySeltator Ralph G, Recto 
", 
AN ACT 
INCREASING THE ALLOWABLE PERSONAL EXEMPTION OF INDIVIDUAL 
TAXPAYERS, AMENDING FOR THE PURPOSE SECTION 35 (A) OF THE 
NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED, AND FOR 
OTHER PURPOSES 
EXPLANATORY NOTE 
It is provided under Section 1, Article XV of the 1987 Philippine Constitution that the 
State recognizes the Filipino family as the foundation of the nation and accordingly, it shall 
strengthen its solidarity and actively promote its total development. In addition, the same Article 
ordains that the State shall defend the right of the family to a family living wage and income. 
In recognition of the above Constitutional precepts, Congress, in enacting Republic Act 
No. 8424, otherwise known as the National Internal Revenue Code of 1997 (Tax Code), allowed 
individuals to claim for personal exemptions under Section 35 thereof. In a decided case, the 
Supreme Court said: 
"XXX 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 individnal taxpayer. These are arbitrary 
amounts which have been calculated by our lawmakers to be roughly 
equivalent to the minimum subsistence, taking into account the personal 
statns and additional qnalified dependents of the taxpayer. They are 
fixed amount in the sense that the amounts have been predetennined by 
OUf lawmakers as provided under Section 35 (A) and (B). Unless and 
until our new lawmakers make new adjustments on these personal 
exemptions, the amounts allowed to be deducted by a taxpayer are fixed 
as predetennined by Congress. I" 
Prior to its amendment in 2008, the Tax Code provides for different amounts of personal 
exemptions depending on the personal status of the taxpayer. A single individual was allowed a 
basic personal exemption of P20,000, for head of family, P25,000 and for each married 
individual, P32,000. With the enactment of Republic Act No. 9504 in 2008, the allowable 
personal exemption for each taxpayer has been increased to a unifonn amount of Fifty thousand 
pesos (P50,000) regardless of the personal status ofthe taxpayer. 
1 Carmelino F. Pansacola vs. Commissioner of Internal Revenue, G .R. No. 159991, promulgated on November 16, 
2006. 


The amount of personal exemption has not been increased by Congress since 2008 even 
as during this time, the amount can be considered as insufficient to approximate the prevailing 
annual poverty threshold for a family of five (5) based on the data released by the then National 
Statistics Office in 2006. For the said year, or two years prior to the adjustment of the allowable 
personal exemption by virtue of RA 9504, the average annual poverty threshold2 amount for a 
family of five was P66,785. For 2012, the amount increased to P94,675. 
The Constitution explicitly provides that ilie rule of taxation shall be unifollli and 
equitable and iliat Congress shall evolve a progressive system of taxation. Equity in taxation 
involves the "ability to pay" principle. The concept of equity in taxation requires that such 
apportionment be more or less just in tile light of the taxpayer's ability to shoulder tile tax burden 
(usually measured in tenus of the size ofwealili or property or income) and if warranted, on the 
basis of the benefits he receives from the government. Applying iliis Constitutional fiat to ilie 
case of purely compensation income earners, those who are placed in the lower income brackets 
must be taxed at a lower rate thereby allowing them the opportunity to pay lesser taxes and enjoy 
a higher take home pay for their families. 
From 2008 to present, the daily minimum wage rate in Metro Manila increased from 
P382 to P481. A paltry increase amidst tile rising cost ofliving and losses in human productivity 
due to the traffic congestion plaguing tile country's major cities. 
To connter the steady increase of prices of consumer goods and services and to help our 
hardworking middle class in meeting the demands' of daily living, this bill seeks to adjust the 
allowable personal exemption for each individual taxpayers from P50,000 to PI50,000. 
In the case of married individuals, the gainfully employed spouse may claim an 
exemption for ilie other spouse even though the latter did not eam any gross income for ilie 
taxable year and did not file a return for as long as the said spouse is living exclusively wiili the 
gainfully employed spouse. This, however, does not classify ilie said spouse as a dependent, but 
merely recognizes tile latter's effOlis in tile care and maintenance of the family and of the 
household which is akin to the recognition accorded by the Family Code in cases contemplated 
nnder Article 1473 thereof. In short, all married individuals may claim a maximum amount of 
allowable personal exemption of up to P300,000 regardless of whether the other spouse is 
employed or not. 
Aside from providing a nnifonn and adjusted individual personal exemption, RA 9504 
also exempted minimum wage eamers from the payment of income tax. Tax experts, however, 
noted that RA 9504 also gave rise to another fonn of wage distortion. To illustrate, compare a 
married couple who are both eaming the statutory minimum wage and a couple wherein only one 
is eaming a salary which is slightly higher than the statutory minimum wage. Applying tile 
provisions of RA 9504 in the said situation, the taxpayer eaming a salary slightly above tile 
statutory minimum wage stands to lose out to minimum wage eamers in tenns of take home pay 
although both are facing the same high cost of daily living. Taking this into consideration and to 
2 Estimated amount generated based on the refinements in the official poverty estimation methodology approved by 
the National Statistics Coordination Board on February I, 20 II. The a,mual amount to be spent for the cost of the 
basic food and nou-food requirements. 
3 Article 147 of the Family Code provides: 
"Article 147. When a man and a woman who are capacitated to marry each other, live 
exclusively with each other as husband and wife without the benefit of lTIatTiage or under a void 
marriage, their wages and salaries shall be owned by them in equal shares and the property 
acquired by both of them though their work or industry shall be governed by the rules on co-
ownership. 
In the absence of proof to the contrary, properties acquired while they lived together shall 
be presumed to have been obtained by their joint efforts, work or industry, and shall be owned by 
them in equal shares. For purposes of this Alticte, a pmty who did not participate in the acquisition 
by the other Darty of any property shall be deen1ed to have contributed jointly in the acquisition 
thereof if the fonner's effOlts consisted in the care and maintenance of the family and of the 
household. 
XXX." (Underscoring supplied) 


somehow provide a level playing field, the bill aims to approximate tile tax privilege accorded to 
couples both earning the statutory minimum wage and to grant tile same to married couples 
wherein only one is gainfully employed but merely eaming slightly above the minimum wage. 
Thus, as mentioned in the ilmnediately preceding paragraph, all married couples shall have a 
maximum aggregate allowable personal exemption amounting to P300,OOO. 
Lastiy, the bill provides that the amount of allowable personal exemption be adjusted by 
the President six (6) years after the effectivity' of the Act and every six years iliereafter to its 
present value using the Consumer Price Index (CPI) as published by the Philippine Statistics 
Authority. 
. 
In view of the foregoing, the passage of this bill is earnestly sought. 
IAIM 
, 


1 
SIXTEENTH CONGRESS OF THE REPUBLIC ) 
OF TIlE PHILIPPINES 
) 
Third Regular Session 
) 
'15 
SEP 16 P 2 :40 
SENATE 
Introduced by Senator Ralph G. Recto 
AN ACT 
INCREASING THE ALLOWABLE PERSONAL EXEMPTION OF INDIVIDUAL 
TAXPAYERS, AMENDING FOR THE PURPOSE SECTION 35 (A) 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 35 (A) of Republic Act No. 8424, otherwise known as the 
2 
National Internal Revenue Code of 1997, as amended, is hereby further amended to read as 
3 
follows: 
4 
"SEC. 35. 
Allowance of Personal Exemption for Individual Taxpayer. -
5 
"(A) In General. - For purposes of detennining the tax provided in Section 24 (A) of 
6 
this title, there shall be allowed a basic personal exemption amounting to [Fifty 
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thousand pesos (P50,000) for each individual taxpayer.] ONE HUNDRED FIFTY 
8 
THOUSAND PESOS (PI50,OOO) FOR EACH INDIVIDUAL TAXPAYER. 
9 
[In the case of married individual where only one of tile spouses is deriving gross 
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income, only such spouse shall be ailowed tile personal exemption.] "MARRIED 
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INDIVIDUALS MAY FILE THEIR INCOME TAXES EITHER JOINTLY OR 
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SEPARATELY. 
IN CASE OF JOINT FILING, THE BASIC PERSONAL 
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EXEMPTION MAY BE CLAIMED BY BOTH SPOUSES. 
IN CASE OF 
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SEPARATE FILING, A TAXPAYER MAY STILL CLAIM THE PERSONAL 
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EXEMPTION FOR THE SPOUSE NOTWITHSTANDING THE FACT THAT 
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THE LATTER IS NOT GAINFULLY EMPLOYED, HAD NO GROSS 
17" 
INCOME AND DID NOT FILE A RETURN: PROVIDED, THAT THE SAID 
18 
SPOUSE IS LIVING EXCLUSIVELY WITH THE TAXPAYER. 
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"PROVIDED, FURTHER, THAT EVERY SIX (6) YEARS AFTER THE 
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EFFECTIVITY OF THIS ACT, THE PRESIDENT OF THE PHILIPPINES 
3 
SHALL ADJUST THE AMOUNT PROVIDED HEREIN TO ITS PRESENT 
4 
VALUE USING THE CONSUMER PRICE INDEX, AS PUBLISHED BY THE 
5 
PHILIPPINE STATISTICS AUTHORITY (PSA). 
6 
"(B) XXX." 
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Section 2. 
Implementing Rules and Regulations. - The Secretary of Finance, shaH, 
upon the recommendation of the Commissioner of Internal Revenue, promulgate not later than 
thirty (30) days upon the effectivity of this Act the necessary rules and regulations for its proper 
and effective implementation. 
Section 3. 
Separability Clause. - If any part or provision of this Act is declared 
invalid or unconstitutional, other provisions not affected thereby shall remain in full force and 
effect. 
Section 4. 
Repealing Clause. -
All laws, Acts, Presidential Decrees, Executive 
Orders, issuances, presidential proclamations, rules and regulations or parts thereof which are 
contrary to and inconsistent with any provision of this Act are hereby repealed, amended or 
modified accordingly. 
Section 5. 
Effectivity. - 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, 
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