President Ferdinand Marcos Jr. has proposed two tax‑relief measures that would affect more than 3.13 million workers and roughly 78,000 small businesses, while reducing government revenue by an estimated 66 billion pesos annually, according to the Department of Finance.
The Finance Secretary announced that raising the annual income‑tax exemption threshold from 250,000 to 350,000 pesos would cut revenue by about 60 billion pesos each year.
The change would increase the number of tax‑exempt workers from approximately 5.1 million to 6.3 million, adding roughly 1.2 million individuals who would no longer pay personal income tax.
Workers earning between 250,000 and 350,000 pesos would gain up to 15,000 pesos in additional take‑home pay, while those with earnings above 350,000 pesos could see up to 17,500 pesos more.
About 78,000 micro and small enterprises—including bakeries, cafés, food stalls, sari‑sari stores, and repair shops—would be exempted from the minimum corporate income tax (MCIT).
Currently, qualified small corporations must pay either a 2 % MCIT on gross income or the regular 20 % corporate tax on net taxable income, whichever is higher, even when operating at a loss.
Eliminating the MCIT would relieve loss‑making businesses from tax liability while profitable firms would continue to pay the regular corporate tax, resulting in an estimated annual revenue loss of 6 billion pesos.
The finance department suggested that the shortfall could be offset by increasing excise taxes, though specific proposals were not detailed.
Potential revenue sources include higher excise taxes on products such as vape items, heated tobacco, and sugar‑sweetened beverages.
Business‑tax experts note that removing the MCIT could improve cash flow for small firms, enabling them to pursue growth opportunities and potentially expanding the tax base over time.
Some analysts argue that broader reforms—such as expanding the optional gross‑income tax regime, raising its rate, and increasing the threshold—could generate additional revenue while encouraging compliance among self‑employed workers and online sellers.
Critics describe the proposals as populist measures that fail to address underlying political and economic challenges, warning that insufficient revenue offsets could heighten fiscal risks and impact the country’s credit ratings.
The national budget deficit widened by 2.8 % to 786.8 billion pesos in the first half of the year, representing 47.4 % of the revised 2026 deficit ceiling and 5.4 % of gross domestic product.
Legislative action includes a House bill to raise the tax‑free income threshold to 350,000 pesos, adjust graduated tax rates for income above that level, and preserve exemptions for minimum‑wage earners.
A Senate bill mirrors the 350,000‑peso exemption, while another Senate measure seeks to raise the exemption ceiling to 600,000 pesos, applying a 15 % rate to taxable income between 600,000 and 2 million pesos.
