House OK’s restructured income tax system

The House of Representatives approved on final reading last night a bill that restructures the income tax system and provides a simplified net income taxation system for self-employed individuals and professionals.

House Bill 5296, that proposes a six-bracket system for determining income tax payments, was approved with 36 other bills, some that had been due for final approval since last year. The measure, authored by Tarlac Rep. Jesli A. Lapus, House ways and means committee chairman, exempts those whose taxable income is P55,000 and below. Individuals with taxable income from above P55,000 to P150,000 pay 25% of the excess over P55,000; from above P150,000 to 250,000, P23,750 plus 28% of the excess over P150,000; from above P250,000 to P350,000, P51,750 plus 31% of the excess over P250,000; from above P350,000 to P500,000, P82,750 plus 33% of the excess over P350,000; and those with taxable income of over P500,000 will pay P132,250 plus 35% of the excess over P500,000.

There will be lower income tax than the current seven-bracket system for those with annual taxable income of P400,000, but rates rise slightly for those who earn above this amount.

Personal exemptions are raised by 50% from the present system. Single or legally separated individuals are granted a P30,000 exemption, up from P20,000; heads of family are granted a P37,500 exemption, up from P25,000; each married individual is granted a P48,000 exemption, up from P32,000; and an additional P12,000 exemption is given for each dependent, up to a maximum of four in a family, raised from P8,000.

Self-employed individuals and professionals will get up to a 40% standard deduction rate on gross revenue, or could choose to compute taxable income with additional deductible expenses for: sales discounts; sales returns and allowances; raw materials, supplies and direct labor; salaries of employees; telecommunications, electricity, fuel and water -- provided these do not reach 10% of total taxable income; business rentals; interest paid or accrued on loans contracted from accredited financial institutions; freight, handling and trucking; insurance expense; professional fees; and contributions to government financial institutions.

A version by Sen. Ralph G. Recto of the Senate ways and means committee would abolish the various tax brackets, replaced by a flat 35% rate and uniform deduction of P100,000. -- Paul C.H. How

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