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PHILIPPINES: Income Tax Liability Set to be Cut in Bid to Support Low Earners

Changes are being proposed to increase personal tax allowances with the aim of reducing the burden on the lowest earners. Under the terms of the mooted legislation, the new tax obligations would see those earning up to a maximum of P20,000 (US$ 427) per annum have a 5% liability. The liability would then increase on an incremental basis.

At the highest level, those earning more than P1 million (US$21,339) would have a liability of P250,000 plus 32% of any excess above P1 million. In 2015, the average annual income level in the Philippines was P162,415. Under the new system, this would be taxed at P17,000 plus 20% of any excess above P140,000 (up to a maximum of P279,999).

Under the current system, those earning just above P500,000 pay the same 32% income tax rate as those earning in the millions. Addressing this inequality and bringing the Philippine’s tax regime into closer alignment with its ASEAN neighbors have been the prime factors in driving these changes.

It is now widely expected that cuts to corporate income tax (CIT) rates will also be introduced over the coming months.

Content provided by Picture: HKTDC Research
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