Press Release
January 11, 2006
*Senate to make minimum wage tax-exempt*
Sen. Ralph Recto today bared the Upper Chambers plan to chisel in
stone the personal income tax exemption of those currently earning
the minimum wage.
While he commended Malacañang
and the Finance department for coming
up with a revenue regulation exempting minimum wage earners from the
withholding tax, Recto said the directive merely defers the payment
of the income tax to April 15 of the following year.
It is not tax exemption. What it merely says is that your salary
will no longer be subjected to withholding tax every month but you
will still pay the tax later. While tax is no longer withheld
monthly, you are still liable to pay for it in full come filing
time. It shifts from deferred payment of tax to delayed payment of
tax, he said
What workers need is to make the relief permanent, Recto said.
And we can do it by revising the tax code by raising exemptions so
that a minimum wage earner today would be spared from paying a tax.
The statutory minimum wage varies per region with Metro Manila the
highest at P325 a day.
With 22 working days a month, and at 13 months a year, the gross
pay of a minimum wage earner is P92,950. Jointly, a married couple
of minimum wage earners make P185,900 a year.
This amount will be the point of discussion when the Senate ways
and means committee, which Recto chairs, meets this month to set
the new threshold for personal income, he said
The new tax-free zone should be in this area, Recto said. He said
the Department of Finance will be closely consulted in crafting
legislation because of their valid concerns about the revenue loss
that such a tax relief would cause.
At present a family of two income-earners and four dependents can
claim a maximum of P96,000 in deductions plus a tax credit of
P2,.400 for health insurance payments, Recto said. Despite their
meager income, they still pay P13,220 in income tax every year.
As the current tax bracket was set almost ten years ago, Recto said
a new benchmark in tax exemption is in order.
Exempting the minimum wage from income tax would benefit 1.88
million workers, Recto said, citing tax filing data from the Bureau
of Internal Revenue.
In the Senate, bills for increasing the individual income
exemptions have been filed by Recto and Sen. Juan Ponce Enrile. |