In his press release announcing the Senate’s approval of the legislative body’s version of the tax reform package on November 28, the bill’s principal author Senator Sonny Angara said it was the biggest tax relief to be granted the country’s workers.
The Senate approved on Tuesday its version of the Tax Reform for Acceleration and Inclusion (TRAIN) bill, which is expected to exempt 6.8 million workers from paying income taxes. Sponsored by Angara, chairman of the ways and means committee, Senate Bill 1592 was approved on third and final reading with 17 affirmative votes and one negative vote.
“Sa kasaysayan ng pagbubuwis sa bansa, ito na ang pinakamalaking income tax relief na maipagkakaloob natin sa mga manggagawa. We’re putting more money in the pockets of Filipinos. Gusto nating gawing patas ang ating income tax system na naging hindi makatarungan sa pagdaan ng panahon,” Angara said.
To illustrate, he cited as example a government teacher with a monthly income of Php20,179 who now currently pays Php28,717 in taxes annually at a rate of 25 percent. “Under the proposed new tax scheme, he or she will be already exempt and will no longer have to pay taxes. The teacher will be able to take home bigger pay and save Php2,393 monthly,” he said.
However, a detailed analysis done by the Action for Economic Reforms (AER), an economic policy and advocacy group, showed that there’s more to it than Angara is letting on. It turns out that, when compared to the TRAIN version passed by the House of Representatives months earlier, the Senate bill will lead to higher income tax rates.
Though the Senate version still lowers personal income taxes compared to the current tax code, it represents a missed opportunity to provide greater tax relief to the vast majority of the country’s low and middle income earners.
Citing its own example, the AER said: “An individual who earns Php400,000 a year would pay Php7,500 less in personal income tax annual starting 2020 if the House rates were followed over the Senate rates.”
Representatives of both the Senate and the House of Representatives are expected to meet and reconcile the differences between their respective versions of the tax bill in the next few weeks when the bicameral conference committee starts meeting on the measure. If they agree on a common version, the bill is then submitted for ratification by both legislative bodies. After that, it goes to President Rodrigo Duterte who can choose to sign it, veto it or allow it to lapse into law by doing neither.
Check out the infographics on this page for a comparison of what your likely personal income tax obligations will be under the Senate bill compared to the House version.
This story originally appeared on Entrepreneur.com.ph.
* Minor edits have been made by the Fhm.com.ph editors.