NEW LAW CONVERTS TAXES INTO TAKE HOME PAY
Chiz says future minimum wages are automatically tax-exempt

Even if the present minimum wage will be increased, there will be no need to pass a new law increasing personal income tax exemptions as the newly-signed tax relief bill automatically confers a no-tax status on future minimum wages whatever their amounts are.

Sen. Chiz Escudero explained that the bill signed into law by President Arroyo this morning has "indexed" personal income tax exemption on the minimum wage.

The amount of income exempt from tax automatically follows the movement of the legal minimum wage, Escudero said.

This "coupling," he stressed, will spare the country of the need to go through "revolving-door legislation" wherein Congress will have to"recalibrate tax rates to reflect the increase in the minimum wage."

"What we have put in the law is the provision that assigns a no-tax status on the minimum wage of private workers and those in government service whose pay is equivalent to the daily private sector minimum wage , " Escudero said.

In addition to scrapping the income tax on the minimum wage, the law also increases tax exemptions for other employees.

Under the law, an individual, regardless of civil status, can claim personal exemption of P50, 000, and additional exemption of P25, 000 each for a maximum of four dependents.

So a working couple with four kids can claim a combined exemption of P200, 000, which is about double of current rates, Escudero said

The law, he added, also waives the need for minimum wage earners and individuals who are exempt from income tax from filing the tax returns.

It is also under the spirit of simplifying tax compliance - out of the belief that complex tax laws have been a deterrent to tax obedience - that we are adopting simpler hurdles for professionals to meet their tax dues, "Escudero said.

For non-fixed salary income earners, the law grants them the option of claiming a "no-questions-asked" standard deduction representing 40 percent of his gross sales or receipts.

Escudero said that by increasing tax exemptions "the new law retains disposable income in the pocket of workingman, money that will help him during these hard times."

A simulation by the Escudero committee showed that under the newly-signed law a "single" minimum wage earner will save P10,733 in tax payments annually while a "head of family" will be spared of paying P9,733 in taxes.

The tax break is equivalent to one month bonus, or more. We have converted taxes into take home pay," he said.

And this is done without revenue loss on the part of the government, he said.