House committee approves Duterte tax reform package

The House ways and means committee approved the first batch of tax reforms proposed by the Department of Finance (DOF) on Wednesday, May 3.

With a vote of 17-4-3, lawmakers gave their approval to the comprehensive tax reform program, which includes the lowering of personal income tax rates and the reduction of value-added tax (VAT) exemptions to counter revenue loss.

READ: Tax Reform Package: Zero tax for employees, teachers receiving 250K and below

With the committee's approval, the tax reform package will now be up for 2nd reading at the House plenary.

Under the measure, the maximum rate of personal income tax will be reduced over time from the current 32% to 25%, except for high income earners.

Those earning P250,000 or below annually will be exempted from paying income taxes. The mandated 13th month pay up to P82,000 as well as other bonuses will still be tax-free.

READ: Tax Reform Package: Zero tax for employees, teachers receiving 250K and below

Those with income of between P250,000 and P400,000 would pay a tax of 25 percent of the amount in excess of P250,000.

Those with income of more than P400,000 up to P800,000 would have a tax of P30,000, plus 25 percent of the excess over P400,000. Those earning from P800,000 to P2 million would pay P130,000 plus 30 percent of the excess over P800,000, while those with income of P2 million to P5 million would pay P490,000 plus 32 percent of the excess over P2 million.

Those earning over P5 million would pay P1.450 million plus 35 percent of the excess over P5 million.

Under the present law, those earning over P500,000 after maximum deductions of P200,000 for a working couple pay an income tax of P125,000 plus 32 percent, which is the maximum rate, of the excess over P500,000.

The tax on cars, including sport utility vehicles, worth up to P1.1 million would go up by 100 percent.

Those worth between P1.1 million and P2.1 million would be assessed a tax of P224,000 plus 100 percent of the excess over P1.1 million, while those valued at more than P2.1 million would be levied P1.224 million plus 200 percent of the excess over P2.1 million.

Under the DOF proposal, the tax reform package would be imposed starting July 1 this year.

However, it is unlikely the proposed tax reform law would be enacted by that time.

Sources: Rappler, Philstar, GMA Network