Finance: Govt to forfeit P20b in revenues from tax relief law

The government will forego roughly P20 billion in potential revenues this year from the full-year implementation of the tax relief law, which increased the personal exemptions of taxpayers and waived the withholding tax on minimum wage earners.

The Finance Department and the Bureau of Internal Revenue finally reconciled the potential revenue losses from the implementation of the tax relief law that amended the National Internal Revenue Code, which was signed into law by President Gloria Macapagal Arroyo in July last year.

The tax collection agency said the tax relief law would result in P28 billion in losses but the Finance Department said the law would only cost the national coffers about P14 billion.

The law, which exempts minimum wage earners from withholding tax and increases the personal exemptions of individual taxpayers, took effect on July 6, 2008.

The law increased the personal exemption of single taxpayers to P50,000 from P20,000; to P50,000 from P25,000 for the head of family; and to P50,000 from P32,000 for married individuals. Likewise, the deduction of each qualified dependent not exceeding four was increased to P25,000 from P8,000.

The law also gave professionals, self-employed individuals, and corporations an option of deducting a uniform 40 percent from gross sales or receipts to arrive at taxable income subject to the income tax instead of the standard 10 percent under the tax code. This will result in a revenue gain of P15.03 billion.

The government will forego another P20 billion from the reduction in the minimum corporate income tax rate to 30 percent from 35 percent as mandated under the Expanded Value Added Tax Act of 2005.

After abandoning its commitment to balance the budget last year, the Philippines is staring at a budget shortfall of P102 billion, or 1.2 percent of the gross domestic product this year, from about P75 billion or 1.0 percent of GDP last year.

The Finance Department is looking for additional sources of revenues as part of efforts to limit the budget deficit.

The Finance Department plans to pursue other sources of revenues to limit the budget deficit this year.–Lawrence Agcaoili, Manila Standard Today