Senators file bills to provide tax relief for workers, MSMEs

Two senators filed separate bills on Wednesday seeking to ease the tax burden on Filipino workers and boost the resilience of micro, small, and medium enterprises (MSMEs), which are seen as vital to the country’s post-pandemic economic recovery.

Senator Sherwin Gatchalian introduced a measure proposing to increase the annual income tax exemption threshold from PHP250,000 to PHP400,000, potentially raising take-home pay for middle-income workers. He also proposed increasing the tax-exempt ceiling for 13th month pay and other bonuses from PHP90,000 to PHP150,000.

“The working Filipinos have always carried the economy on their backs. It is time we lend them a hand and help them in their fight for better lives,” Gatchalian said.

Additional tax relief measures in his proposal include removing taxes on overtime pay, night shift differentials, holiday pay, hazard pay, and service charges received by service industry workers. He also recommended exempting honoraria and allowances of election workers from income tax.

Gatchalian's proposal includes provisions for micro taxpayers to deduct 50 percent of their labor expenses, treating discounts granted to senior citizens, persons with disabilities, and solo parents as tax credits, and exempting micro businesses from paying withholding taxes.

Meanwhile, Senate President Francis Escudero filed a bill proposing a three-year income tax holiday for MSMEs. He also recommended allowing these businesses to deduct 25 percent of their labor expenses from taxable income and reducing the optional gross income tax rate from 8 percent to 5 percent.

Escudero further suggested revising creditable withholding tax rates to 1 percent for goods and 2 percent for services, and reinstating the mandatory credit allocation for MSMEs by financial institutions for the next decade.

“These measures will allow our MSMEs, particularly those that are struggling financially, to continue their operations, hire more people, and even consider an expansion in the future,” Escudero said.

The proposals come as part of a broader legislative push to improve economic inclusivity and support grassroots-level job creation. The bills are expected to be deliberated in the upcoming sessions of the 20th Congress.