Government to forego P20 billion in revenues due to tax exemptions
- Iris Gonzales () - February 16, 2009 - 12:00am

MANILA, Philippines - The government expects to forego an estimated P20 billion in potential revenues this year because of the full-year implementation of the law that increased the personal exemptions of taxpayers and exempted the withholding tax on minimum wage earners.

Estimates from the Department of Finance showed the full year-implementation of Republic Act 9504 or the tax relief law that took effect in July last year would cost the government P20 billion in revenues.

Nevertheless, government economic managers said this measure should give Filipinos an additional buffer to help them cope with the global financial turmoil.

Last year, the government estimated foregone revenues of roughly P14 billion from the law’s implementation which started only in July.

The law exempted minimum wage earners from withholding tax and increased the personal exemptions of individual taxpayers.

Specifically, 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.

Furthermore, 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 would result in a revenue gain of P15.03 billion.

Aside from the P20 billion in potential revenue losses from the tax relief law, the government is also set to forego another P20 billion from the reduction in the minimum corporate income tax rate to 30 percent this year from 35 percent as mandated under Republic Act 9337 or the Expanded Value Added Tax Act of 2005.

Officials said this measure should also give consumers additional spending power that could help them cope with the worldwide financial crisis.

The Finance department is looking for additional sources of revenues as part of efforts to limit the budget deficit at P102 billion or 1.2 percent of gross domestic product this year from a target of P75 billion or one percent of GDP last year.

Possible sources of revenues the department is looking at are proceeds from the sale of state-owned assets and new tax and non-tax measures.

BILLION DEPARTMENT OF FINANCE EXPANDED VALUE ADDED TAX ACT GOVERNMENT LAW P20 REPUBLIC ACT REVENUES TAX YEAR
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