Lowering the Rates of Tax on Taxable Income of Individuals

Senate Office of the Secretary TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES 26 JAN 26 P1:40 First Regular Session SENATE RECEIVED BY: S. No. 1685 Introduced by Senator Jinggoy Ejercito Estrada AN ACT LOWERING THE RATES OF TAX ON TAXABLE INCOME OF INDIVIDUALS, FURTHER AMENDING SECTION 24 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED EXPLANATORY NOTE AmBisyon Natin 2040 envisions Filipino families who enjoy a stable and comfortable lifestyle with security that they will have enough resources to provide for their needs and unexpected expenses.! One key strategy to achieve this vision is to provide adequate income to the Filipino workers, which should be aligned with the Constitutional guarantee that workers shall be entitled to a living wage. Several policies were implemented by the government towards the achievement of this vision. In particular, tax policies related to workers' income and benefits have been revised over the years. Republic Act No. 100963 or the "Tax Reform for Acceleration and Inclusion (TRAIN)" was enacted into law on December 19, 2017, "to update the income tax structure for individuals by addressing the issue of bracket creep and enhancing progressivity".? 1 About AmBisyon Natin 2040 - AmBisyon Natin 2040 2 "Progressivity, Fairness, and Efficiency: An Evaluation of the Impact of the TRAIN Law on the Distribution of the Income Tax Burden", Congressional Policy and Budget Research Department (CPBRD) Policy Brief No. 2025-04, PB2025-04-IMPACT-OF-THE-TRAIN-LAW-1.pdf

While the TRAIN Law significantly increased the take home pay of income earners, it falls short in improving their living conditions. As observed in the research article, "Assessing the Impacts of TRAIN Law on Consumption, Savings and Unemployment in the Philippines" published in the Journal of Economics, Finance and Accounting Studies of the Al-Kindi Center for Research and Development in 2022, "the enactment of TRAIN Law also has undesirable effects related to a stable and even worse living situation since the increase in income is countered by the increases in the prices of the goods and services, including the essential items. This has led to concerns by Filipinos, primarily those in low to middle-income earners, that the application of this tax at the same time as an increase in global oil prices contributed to the recent rise in Philippine inflation rates. Hence, the gains from the adopted Tax Reform for Acceleration and Inclusion (TRAIN) act are offset by a higher monthly expense."3 This measure seeks to correct the experienced shortcomings of the TRAIN Law by increasing the take home pay of Filipino income earners to help them achieve financial security and improved standard of living, and ultimately, to enable them contribute more to the country's economy as active participants in robust exchange of goods and services. The filing of this measure was enthused by requests to this Representation from our kababayans to help them ease the cost of every day expenses. Undeniably, the current economic conditions still make it difficult for workers to decently provide for their families. This amendment to the TRAIN Law seeks to give them immediate and visible results of their benefits on tax reform. In this light, the immediate passage of this bill is highly recommended. INGE LEECITO ESTRADA 3 ResearchGate

Senate Office of the forcretarp TWENTIETH CONGRESS OF THE ) REPUBLIC OF THE PHILIPPINES First Regular Session ) JAN 26 P1:40 SENATE RECEIVED BY: S. No. 1685 Introduced by Senator Jinggoy Ejercito Estrada AN ACT LOWERING THE RATES OF TAX ON TAXABLE INCOME OF INDIVIDUALS, FURTHER AMENDING SECTION 24 OF REPUBLIC ACT NO. 8424, OTHERWISE KNOWN AS THE NATIONAL INTERNAL REVENUE CODE OF 1997, AS AMENDED Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Section 24 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 follows: "Sec. 24. Income Tax Rates. - "(A) XXX "(1) XXX "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: "(a) Tax Schedule Effective January 1, 2018 until December 31, 2022: "XXX "Tax Schedule Effective January 1, 2023 [and onwards] UNTIL DECEMBER 31, 2026: "XXX

"TAX SCHEDULE EFFECTIVE JANUARY 1, 2027 AND ONWARDS: "Not over P500,000 ....0% "Over P500,000 but not over P800,000 …...15% of the excess over P500,000 "Over P800,000 but not over P1,600,000 .....P22,500 + 20% of the excess over P800,000 "Over P1,600,000 but not over P2,800,000 ......P102,500 + 25% of the excess over P1,600,000 "Over P2,800,000 but not over P8,800,000 .....P402,500 + 30% of the excess over P2,800,000 "Over P8,800,000 .....P2,202,500 + 35% of the excess over P8,800,000 "xxx."

Sec. 2. Separability Clause. - If any provision or part hereof is held invalid or

unconstitutional, the remainder of the law or the provision or part not otherwise affected shall remain valid and subsisting.

Sec. 3. Repealing Clause. - Any law, presidential decree or issuance,

19 executive order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the provisions of this Act are hereby repealed, modified, or amended accordingly.

Sec. 4. Effectivity. - This Act shall take effect fifteen (15) days after its

publication in the Official Gazette or in at least two (2) newspapers of general circulation. Approved,