SENATE REPORTS OWN VERSION OF TAX EXEMPTION FOR MINIMUM WAGE EARNERS

The Senate Ways and Means Committee reported out its version of the tax exemption bill for minimum wage earners yesterday. Committee chairman senator Chiz Escudero has filed Senate Committee Report No. 53 (CR No. 53) recommending the approval of Senate Bill No. 2293 which specifically aims to exempt minimum wage earners from paying income tax and to render relief to all individual taxpayers by adjusting their personal and additional exemptions in order to approximate the increase in inflation since 1997.

S.B. 2293 is in substitution of House Bill No. 3971, the Lower House's own version of granting tax relief and in consideration of Senate Bill Nos. 103,125, 126, 302, 419, 448, 568, 1576, 1615, 1616, 2177 and 2217.

Escudero said the difference of the Senate version which prevailed over the House' is that the holiday pay, hazard pay, overtime pay as well as nightshift differential pay are exempted from income tax. These items are included in the computation under House Bill No. 3971

CR No.53 aims to increase the take home pay of our workers to enable them to cope with the increasing prices of commodities. Escudero said that after the passage of the Comprehensive Tax Reform or CTRP in 1997, the take home pay of the workers had been drastically reduced by the spiraling cost of fuel products which spawned the increase in prices of commodities, power and transportation.

"Despite efforts to increase the level of standard of living of our people, only minimal adjustments were made on the salaries of the workers in the private and government sector, who are also burdened by the inflexible individual income tax rates and pegged amounts of personal and additional exemptions in the CTRP." Escudero aid out of the estimated 2.484 million compensation income tax filers in 2004, approximately 87% comprised the minimum wage earners.

For married individuals, the husband and wife, subject to the provision of the reports Section 51 (D), shall compute separately their individual income tax based on their respective total taxable income: Provided that if any income cannot be definitely attributed to or identified as income exclusively earned or realized by either of the spouses, the same shall be divided equally between the spouses for the purpose of determining their respective taxable income.

The committee rejected the Simplified Net Income Taxation System (SNITS) carried by the House version, the committee however provided a replacement with the 40% Optional Standard Deduction (OSD) not only for the self-employed and professionals but also for corporations.

According to the DOF's data, the government stands to earn P780 million pesos from the proposed bill. This figure already deducted revenue losses due to the exemption of minimum wage earners and the adjustment of personal exemption to P50, 000 per individual taxpayer and the P25,000 additional exemption per dependent up to a maximum of 4.

Escudero said revenue loss from the tax relief for minimum wage earners, pegged at P3.16 billion pesos and the loss due to increase in exemption estimated at 11.09 billion pesos can be offset by the revenues to be generated from the OSD valued at 15.03 billion pesos.

The senator is optimistic that the Senate version will be adopted and eventually be certified as urgent bill.