Solon wants personal exemption for individual taxpayer raised to P75K from P50K

A lawmaker is seeking to raise the basic personal exemption for individual taxpayers to P75,000 from the present P50,000, and the additional exemption for taxpayers’ dependents to P40,000 from the present P25,000 to ease the income tax burden of ordinary working people.

Rep. Antonio Tinio (Party-list, ACT Teachers) said his proposal will allow the lowest paid government employee to take home a non-taxable income of at least 69 percent of his or her annual pay, while assuring the middle-level government employee and the minimum wage earner of 34 percent and 53 percent of their incomes, respectively.

The present basic personal exemption now stands at 46 percent of the annual salary of the lowest paid government employee with Salary Grade 1 at P9,000 per month, 22 percent of that of a middle-level government employee with Salary Grade 1 at P18,549 per month, 3 percent of that of the President with Salary Grade 33 at P120,000 per month, and 35 percent of that of the minimum wage earner with P11, 780 per month.

Tinio, a Vice Chairman of the House Committee on Basic Education and Culture, said his proposal adheres to the constitutional mandate that taxation must be equitable and progressive.

“By these principles, income earners from the lowest strata, especially purely compensation income earners, are to be taxed less and given more opportunities to decrease their taxable incomes. They comprise the majority of the income taxpayer base, and the State can do no less than increase the amounts they can take home to their families,” he said.

Looking at the adjustments to the personal exemptions in the past two decades, he said Congress has been slow to respond to the needs of the people by increasing these amounts in a timely manner to keep up with the rising cost of living.

Tinio cited in 1991, under Republic Act 7167, the basic personal exemption varied from P9,000 to P18,000, depending on the status of the taxpayer, while the additional exemption amounted to P5,000 per dependent. In 1997, under RA 8424, the basic personal exemption was raised to P20,000 to P32,000 and the additional exemption to P8,000 per dependent.

The latest adjustment was done in 2008 through RA 9504 which raised basic personal exemption to P50,000 and the additional exemption to P25,000 per dependent. But four years later, he said the exemptions have remained at such amounts despite the rising costs which assault daily the family.

As defined by law, personal exemptions are amounts which are deducted from a citizen or resident alien’s gross income to arrive at a lesser income that may be subjected to tax (known as the net or taxable income).”

In House Bill 6723, Tinio sought the amendment of Section 35 of RA 8424 otherwise known as the Tax Reform Act of 1997, as amended by RA 9504. Section 35 pertains to the allowance of personal exemption for individual taxpayer.

Sub-section A provides there shall be allowed a basic personal exemption amounting to P75,000 for each individual taxpayer. Sub-section B provides there shall be allowed an additional exemption of P40,000 for each dependent not exceeding four.

The amendment also provides for an additional Sub-section E which provides the Commissioner of the Internal Revenue shall annually review the allowable deductions under Section 35 in relation to current costs of living and recommend necessary adjustments to Congress.

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