HOUSE F REPRESENTATIVES

Republic of the Philippines =CEIVED
HOUSE OF REPRESENTATI —
Quezon City, Metro Manila pare-25 AUG 2016

sve FODAT
BY: WRU,

House BillNo._ 38360 REGISTRATION UNIT
BILLS AND INCE X SERVICE

SEVENTEENTH CONGRES$
First Regular Session

Introduced by Representative Sharon S. Garin

EXPLANATORY NOTE

The 1987 Philippine Constitution provides that the rule of taxation be uniform and
equitable. It was also a policy that the Congress shall evolve a progressive system of
taxation. Sections 24 (2) and 27 (A) of the National Internal Revenue Code (NIRC) of
1997 provides for the rates of individual and corporate income tax, respectively. For
nineteen (19) long years, such individual and corporate income tax rates remain
unadjusted to inflation.

The current Philippine income tax brackets and tax rates are the highest personal
income tax in the whole Association of Southeast Asian Nations (ASEAN) region. A study
presented by the Tax Management Association of the Philippines (TMAP) shows that a
Filipino taxpayer earning P500,000 annually is taxed at 32%. The comparative tax rates
for equivalent income in other ASEAN countries are: Vietnam, 20%; Cambodia, 20%;
Laos, 12%; Malaysia, 11%; Thailand, 10%; Singapore, 2%; and Brunei, no taxes.

The Bureau of Internal Revenue’s annual report would show that taxes withheld
from salaried workers were the single biggest-contributor group to the hike in its
collections from 2013 to 2014, providing 2.5% (P31 billion) of the 9.7% (P118 billion)
increase

It is high time for the government addressed the built-in inequity of the personal
and corporate income tax system. Maintaining the status quo is no longer acceptable for
the working sector which has endured the impact of inflation through the years.

This bill seeks for the following adjustment in income tax rates to not over P21,613
is subject to 5%, for over P21,613 but not over P64, 839 will be subject to P1,080 plus
10% of the excess over P21,613, for over P64,839 but not over P151,290 shall be subject
to P5,402 plus 15% of the excess over P64,839, for over P151,290 but not over P302,
581 shall be subject to P18,370 plus 20% of the excess over P151,290, for over P302,581
but not over P540,323 shall be subject to P48,628 plus 25% of the excess over P302,581,
for over P540, 323 but not over P1,080, 645 shall be subject to P108,063 plus 30% of the


excess over P540,323 and for those income over P1,080,645 shall be subject to tax of
P270,160 plus 32% of the excess over P1,080,645.

Insofar as the corporate income tax, this measure seeks to lower the current rate
of thirty-five percent (35%) to twenty-five percent (25%).

It likewise proposes that within three (3) after the effectivity and three (3) years
thereafter, the specific taxable amount shall be adjusted to its present value using the
consumer price index as published by the National Statistics Office (NSO).

Once implemented, the lowered rates will benefit the low and middle-income
earners.

In view of the foregoing, the passage of this bill is earnestly sought.



Republic of the Philippines
HOUSE OF REPRESENTATIVES
Quezon City, Metro Manila

SEVENTEENTH CONGRESS
First Regular Session

HOUSE BILL NO.8360

Introduced by Representative Sharon S. Garin

AN ACT

RESTRUCTURING THE INCOME TAXES IMPOSED ON INDIVIDUALS AND CORPORATIONS,
AMENDING FOR THE PURPOSE SECTIONS 24 (A) (2); 27 (A); 28 (A) (1) AND (B) (1); AND 35
(B) 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 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:

[ Not over P10,000
[ Over P10,000 but not over P30,000

[ Over P30,000 but not over P70,000
[ Over P70,000 but not over P140,000

[ Over P140,000 but not over P250,000
[ Over P250,000 but not over P500,000

[ Over P500,000

5% }

P500+10% of the excess
‘over P10,000 ]
P2,500+15% of the excess
‘over P30,000 ]
P8,500+20% of the excess
‘over P70,000 }
P22,500+25% of the excess
over P140,000 ]
P50,000+30% of the excess
‘over P250,000 ]
P125,000+32% of the excess


over P500,000 ]

NOT OVER P21,613 5%

OVER P21,613 BUT NOT OVER P64,839 P1,080+10% OF THE EXCESS
OVER P21,613

OVER P64,839 BUT NOT OVER P151,290 P5,402+15% OF THE EXCESS
OVER P64,839

OVER P151,290 BUT NOT OVER P302,581 P18,370+20% OF THE
EXCESS OVER P151,290

OVER P302,581 BUT NOT OVER P540,323 P48,628+25% OF THE

EXCESS OVER P302,581
OVER P540,323 BUT NOT OVER P1,080,645 P108,063+30% OF THE
EXCESS OVER P540,323
OVER P1,080,645 P270,160+32% OF THE
EXCESS OVER P1,080,645
XXX

XxX

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

(B) xxx
(C) xxx

(D) xxx.”

SEC. 2. Section 27 (A) of the National Internal Revenue Code of 1997, as amended, is hereby
further amended to read as follows:

“SEC. 27. Rates of Income Tax on Domestic Corporations. —

(A) In General. — Except as otherwise provided in this Code, an income tax of [thirty-
five] TWENTY-FIVE percent [(35%)] (25%) is hereby imposed upon the taxable
income derived during each taxable year from all sources within and without the
Philippines by every corporation, as defined in Section 22 (B) of this Code and
taxable under this Title as a corporation, organized in, or existing under the laws
of the Philippines[: Provided, That effective January 1, 2009, the rate of income
tax shall be thirty percent (30%0]


xx
XXX

XXX

10%

XxX,

XXX

(B) xxx

(C) xxx

(D) xxx

(E) xxx."

SEC. 3. Section 28 (A) (1) and (B) (1) of the National Internal Revenue Code of 1997, as amended,
is hereby further amended to read as follows:

“SEC. 28. Rates of Income Tax on Foreign Corporations. —

(A) Tax on Resident Foreign Corporations. -

(1) In General. - Except as otherwise provided in this Code, a corporation organized,
authorized, or existing under the laws of any foreign country, engaged in trade or
business within the Philippines, shall be subject to an income tax equivalent to
[thirty-five] TWENTY-FIVE percent [(35%)] (25%) of the taxable income derived
in the preceding taxable year from all sources within the Philippines[: Provided,
That effective January 1, 2009, the rate of income tax shall be thirty percent
(30%)]

XxX


XXX
XXX
(2) xxx
(3) xxx
(4) xxx
(5) xxx
(6) xxx

(7) xxx

(B) Tax on Nonresident Foreign Corporations. —

(1) In General. - Except as otherwise provided in this Code, a foreign corporation not
engaged in trade or business in the Philippines shall pay a tax equal to [thirty-five]
TWENTY-FIVE percent [(35%] (25%) of the gross income received during each
taxable year from all sources within the Philippines, such as interests, dividends,
rents, royalties, salaries, premiums (except reinsurance premiums), annuities,
emoluments or other fixed or determinable annual, periodic or casual gains,
profits and income, and capital gains, except gains subject to tax under
subparagraph 5 (0)[: Provided, That effective January 1, 2009, the rate of income
tax shalll be thirty percent (30%)]

(2) xxx

(3) xx

(4) xxx

(5) xxx."
SEC. 4. Section 35 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) xx

(B) xxx


PROVIDED, FURTHER, THAT NOT LATER THAN THREE (3) YEARS AFTER
THE EFFECTIVITY OF THIS ACT AND EVERY THREE (3) YEARS
THEREAFTER, THE AMOUNTS OF BASIC PERSONAL EXEMPTION AND
ADDITIONAL EXEMPTION FOR DEPENDENTS HEREIN STATED SHALL BE
ADJUSTED TO PRESENT VALUES USING THE CONSUMER PRICE INDEX,
AS PUBLISHED BY THE NATIONAL STATISTICS OFFICE (NSO).

2x
(C) xxx
(D) 00%.”

SEC. 5. 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. 6. 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. 7. 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 provisions of this Act are hereby repealed, amended or modified accordingly.

SEC. 8. 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,