Republic of the Philippines RECEIVED
HOUSE OF REPRESENTA’
Quezon City
SEVENTEENTH CONGRESS
First Regular Session 7
103 | — ReeIsTRATION UIT
HOUSE BILL NO. _______ iLL AND INDEX SERVICE

Introduced by: Hon. Angelina “Helen” D.L. Tan, M.D.

AN ACT INSTITUTING INCOME TAX REFORM FOR INDIVIDUAL
TAXPAYERS, AMENDING FOR THIS PURPOSE SECTION 24(A)(2) AND
35(A) OF THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS
AMENDED, AND FOR OTHER PURPOSES”

EXPLANATORY NOTE

This measure aims to reduce the country’s income tax rates for individuals in
preparation for the Association of South East Asian Nations (ASEAN) Integration. It is
consistent with the country’s commitment to the ASEAN Economic Community (AEC)
Blueprint, which seeks to transform ASEAN into a single market and production base by
December 2015. The AEC is guided by the following essential elements: free flow of
goods, free flow of services, free flow of investment, freer flow of capital, and free flow of
skilled labor.

To fully benefit from the ASEAN Integration, the Philippines needs to amend its
current income tax schedules since it is expected that human capital would flow to
where it could earn best. Among the 10-member countries of the ASEAN, the
Philippines has the highest tax rate at 32-percent after Thailand and Vietnam. Hence, in
order to attract human capital and to prevent the migration of our own skilled
workforce, it is imperative to reduce the existing income tax rates while maintaining the
progressivity of our income tax system.

Moreover, amidst higher inflation, increase in power rates as well as in the prices
of consumer goods, among other factors, no significant increase in wages had been
made thereby further reducing the purchasing power of our workers. Hence, reducing
the country's income tax rates for individuals will help our workforce keep up with
inflation and cope up with the higher costs of living.

In view thereof, this bill seeks to amend Section 24 of the National Internal
Revenue Code of 1997, as amended, by adjusting the individual income tax brackets and
reducing the rates of individual income tax.

‘The measure also proposes that in the case of married individuals, the taxpayer
spouse may claim an exemption for his or her spouse even through the latter did not
earn any gross income for the taxable year and did not file a return for as long as the
said spouse is living exclusively with the taxpayer spouse. This, however, does not
categorize the said spouse as a dependent, but merely as a recognition of his or her
efforts in the care and maintenance of the family and of the household, which is akin to
the recognition accorded to the Family Code in cases contemplated under Article 147
thereof, Under this proposal, all married individuals may claim a maximum amount of
allowable personal exemption up to P30,000 whether the spouse is employed or not.

The measure also seeks to provide a uniform graduated income tax bracket for
individual taxpayers in order to simplify income taxation for all taxpayers and to make
the same easier to comprehend. Further, it provides for an automatic index of the
taxable income levels and nominal tax rates to inflation every six years without need for

HOUSE OF REPRESENTATIVES


legislative action for purposes of perpetuating equity in the tax system and help ensure
that the tax system treats individual taxpayers the same way from year to year.

For these reasons, immediate approval of this bill is earnestly sought.

(Ltn

ANGELINA “HELEN” D.L. TAN, M.D.
4th District, Quezon


Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City

SEVENTEENTH CONGRESS
First Regular Session

103

HOUSE BILL NO.

Introduced by: Hon. Angelina “Helen” D.L. Tan, M.D.

AN ACT INSTITUTING INCOME TAX REFORM FOR INDIVIDUAL
TAXPAYERS, AMENDING FOR THIS PURPOSE SECTION 24(A)(2) AND
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 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
“(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]
“[Not over P10,000 but

[5%]
[P500 + 10% of the excess over

not over P30,000] P10,000]

“[Over P30,000 but . .. [P2,500 + 15% of the excess over
not over P70,000] P30,000]

“[Over P70,000 but .. .[P8,500 + 20% of the excess over
not over P140,000] P70,000]

“[Over P140,000 but . ..[P22,500 + 25% of the excess over
not over P250,000] P140,000]

“[Over P250,000 but . .. [250,000 + 30% of the excess over
not over P500,000] P250,000]

“[Over P500,000] . .. [P125,500 + 32% of the excess over

P500,000]

“NOT OVER P249,000
“OVER P249,000 BUT NOT.

EXEMPT
P25,000 + 10% OF THE

OVER P1,000,000 EXCESS OF P249,000
“OVER Pi,000,000 BUT NOT... P90,000 + 15% OF THE
OVER P2,000,000 EXCESS OVER P1,000,000
“OVER P2,000,000 BUT . »» P240,000 + 20% OF THE
NOT OVER P3,000,000 EXCESS OVER P2,000,000
“OVER P3,000,000 . +. P440,000 + 25% OF THE

EXCESS OVER P3,000,000

PROVIDED, FINALLY, THAT NOT LATER THAN SIX (6) YEARS AFTER,
THE EFFECTIVITY OF THIS ACT AND EVERY SIX (6) YEARS
THEREAFTER, THE PRESIDENT OF THE PHILIPPINES SHALL ADJUST
THE TAXABLE INCOME LEVELS AND NOMINAL TAX RATES HEREIN
STATED TO ITS PRESENT VALUE USING THE CONSUMER PRICE INDEX,



AS PUBLISHED BY THE PHILIPPINE STATISTICS AUTHORITY (PSA).”

SEC. 2. Section 35(A) of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:

“SEC. 35. Allowance of Personal Exemption for Individual Taxpayer. —

“(A) In General. For purposes of determining the tax as provided in Section 24(A)
of this Title, there shall be allowed a basic personal exemption amounting to [fifty
thousand pesos (P50,000) for each individual taxpayer.] ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000) FOR EACH INDIVIDUAL TAXPAYER.

[In case of married individual where only one of the spouses is deriving gross
income, only such spouse shall be allowed the personal exemption.] “MARRIED
INDIVIDUALS MAY FILE THEIR INCOME TAXES EITHER JOINTLY OR
SEPARATELY. IN CASE OF JOINT FILING, THE BASIC PERSONAL
EXEMPTION MAY BE CLAIMED BY BOTH SPOUSES. IN CASE OF
SEPERATE FILING, A TAXPAYER MAY STILL CLAIM THE PERSONAL
EXEMPTION FOR THE SPOUSE NOTWITHSTANDING THE FACT THAT
THE LATTER IS NOT GAINFULLY EMPLOYED, HAD NO GROSS INCOME
AND DID NOT FILE A RETURN: PROVIDED, THAT THE SAID SPOUSE IS
LIVING EXCLUSIVELY WITH THE TAXPAYER.”

PROVIDED, FURTHER, THAT NOT LATER THAN SIX (6) YEARS
AFTER THE EFFECTIVITY OF THIS ACT AND EVERY SIX (6) YEARS
THEREAFTER, THE PRESIDENT OF THE PHILIPPINES SHALL ADJUST
THE AMOUNT HEREIN STATED TO ITS PRESENT VALUE USING THE
CONSUMER PRICE INDEX, AS PUBLISHED BY THE PHILIPPINE
STATISTICS AUTHORITY (PSA).”

SEC. 3. Implementing Rules and Regulations, — The Secretary of Finance, shall,
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.

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. 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. 6. Effectivity. - This Act shall take effect fifteen (15) days after its publication
in the Official Gazette or in at least tow (2) newspapers of general circulation.

Approved,