From the Explanatory Note
Republic Act 8424 or the National Internal Revenue Code…allows for “personal exemptions” – amounts which are deducted from [one's] gross income to arrive at a lesser income that may be subjected to tax (known as the net or taxable income). [According to jurisprudence,] “Personal exemptions are the theoretical personal, living, and family expenses of an individual…These are arbitrary amounts…roughly equivalent to the minimum of subsistence, taking into account the personal status and additional qualified dependents of the taxpayer.”
x x x
In 2008, the basic personal exemption of P50,000 was 68% of the annual salary of the lowest-paid government employee (Salary Grade 1 at P6,149 per month), 33% of that of a middle-level government employee (Salary Grade 11, P12,748 per month), and 6% of that of the Philippine President (Salary Grade 33, P69,878 per month). It was 42% of the annual basic pay of the minimum wage earner in the private sector in the National Capital Region (P382 per day).
The basic personal exemption now stands at 46% of the annual salary of the lowest-paid government employee (Salary Grade 1 at P9,000 per month), 22% of that of a middle-level government employee (Salary Grade 11 at P18,549 per month), 3% of that of the President (Salary Grade 33 at P120,000 per month), and 35% of that of the minimum wage earner (P11,780 per month).
Per Constitutional mandate, 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. However, much more needs to be done in this regard. In Chapter VII of the NIRC stands, for instance, only three types, out of at least 16, of allowable deductions are available to purely compensation income earners – premium payments on health and/or hospitalization insurance, the basic personal exemption, and the additional exemption for dependents. The rest are fully enjoyed exclusively by corporate taxpayers.
This bill aims to increase the basic personal [exemptions from P50,000 to P75,000] and additional exemptions [from P25,000 to P40,000 per dependent], and to give the Commissioner of Internal Revenue the duty to annually review these exemptions in relation to current living costs and recommend necessary adjustments to Congress. It proposes the restoration of the exemptions to the 2008 levels, thereby easing the income tax burden on ordinary working people. This proposal will allow the lowest-paid government employee to take home a non-taxable income of at least 69% of his or her annual pay. The middle-level government employee and the minimum wage earner will be assured of 34% and 53% of their incomes, respectively.