Press Release
April 30, 2008

Zubiri wants income tax exemption
for minimum wage earners

Senator Juan Miguel Zubiri wants minimum wage earners to be exempted from the payment of income tax. "Minimum wage earners need this relief. This is a sure way of giving them extra cash by letting go of the income taxes we currently collect from them -- the money they worked for but never enjoys as the tax is automatically deducted.

According to Zubiri, "computations by the National Wages and Productivity Commission, the successive price hikes of basic commodities and services have since eroded their purchasing power. We want to give them cheap medicine, cheap rice and cheap petroleum, which is so very hard to achieve. On the other hand, exempting them from paying the income tax would be a sure fire way of giving relief."

He cited that "a family of six in Metro Manila receiving the minimum wage of P 362.00 in Metro Manila actually gets to enjoy the equivalent in real wage worth only P241.66 (based on March 2008 Consumer Price Index, year 2000=100)." He stressed that his proposal "supports and is in line with labor's right to satisfy his family's basic minimum requirements."

In Senate Bill 2177, Zubiri revealed that as of the latest figures of the Department of Finance, the State collects P950.72 Million from minimum wage earners.

"This will not entirely become a loss to government. This is just a drop in the bucket or about 0.1% of BIR's tax collection target of P874 B for 2008. By exempting minimum wage earners from the payment of income tax, we are handing them cash which would be spent for basic family needs, thereby boosting consumption in the local economy creating a multiplier effect, and from which government will recapture its share through other forms of taxation."

He acknowledged that "the State aspires to balance its revenues and expenditures so that it may deliver basic services and provide for further economic, political and social development. It relies on various taxes, fees and charges, sales of assets and other resources to sustain the country's needs. Therefore, the State naturally is protective of its existing revenues such as the income taxes collected from fixed income earners including those earning the minimum wage."

The Department of Labor and Employment estimates that there are 10,954,925 purely compensation earners. Of these, 3,007,583 are earning wages higher than the minimum; 5,192,908 are paid lower than the minimum; and 2,754,434 are receiving the minimum wage.

"Assuming a family of six composed of a married couple with four qualified dependent children and supported by one working parent earning the minimum wage, this family still have to shell out from P2,000 to more than P10,000 as income tax. We need to correct that and lift the burden off the working men's shoulders

This bill proposes to ease minimum wage earners' burden by amending Section 24(A) and Sec. 51(A) 2(b) of the National Internal Revenue Code of 1997, as amended, thereby, exempting individuals with pure compensation income that does not exceed the annual statutory minimum compensation from the payment of income tax.

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