Marcos Tax Plan to Cost Gov’t P66 Billion Annually, Raising Fiscal Concerns

MANILA, Philippines — The Philippine government stands to forgo about P66 billion in revenue under President Marcos’ proposal to expand personal income tax exemptions and exempt small businesses from the minimum corporate income tax. Finance Secretary Frederick Go said on Wednesday that raising the annual personal income tax exemption threshold to P350,000 from P250,000 would reduce government revenue by about P60 billion a year. READ: Gov’t eyes tax relief for middle class Filipinos But Go argued that the tax relief would provide a timely boost to workers’ incomes. The Department of Finance estimates the proposal will benefit at least 3.13 million workers, including 1.2 million who will no longer pay personal income tax. That could increase the number of tax-exempt workers to 6.3 million from 5.1 million. Workers earning between P250,000 and P350,000 a year would receive up to P15,000 in additional annual disposable income, while those earning P350,000 or more would see their annual take-home pay rise by as much as P17,500, Go said. Exempting micro and small enterprises from the minimum corporate income tax would cost the government another P6 billion in annual revenue, Go said. Under current rules, firms pay either a 2 percent minimum corporate income tax based on gross income, or the regular 20 percent corporate income tax on net taxable income, whichever is higher. The finance chief said the proposal would benefit 78,000 tax-paying micro and small enterprises, especially those that may be operating at a loss. “The Department of Finance fully supports all the reforms and measures mentioned by President Bongbong Marcos,” Go said. Mr. Marcos unveiled the proposals in his State of the Nation Address, where he pledged a package of pro-consumer measures aimed at rebuilding public confidence in his administration following a sweeping anticorruption campaign and a prolonged political feud with Vice President Sara Duterte. The proposals, however, have raised questions about how the government intends to preserve its fiscal consolidation plan. In a report published by Bloomberg on Wednesday, Moody’s Ratings said the key risk is whether the administration can maintain the credibility of its deficit-reduction strategy, with this year’s budget shortfall capped at P1.66 trillion. READ: BIR, BOC still upbeat on reaching 2026 goals The ratings firm said the government’s fiscal path “will depend on offsetting the proposed tax exemptions, further revenue mobilization and spending efficiency.” Asked how the administration planned to make up for the lost revenue, Go said the government could turn to excise taxes. In addition to the tax cuts, Marcos proposed an amnesty on unpaid income, donor’s, estate and value-added taxes and a ban on passing electricity system losses on to consumers. INQ