Wednesday, June 18, 2008 Minimum wage earners won’t have to pay income tax; hike in earnings assured
MINIMUM wage earners are now exempted from paying income tax while other salaried workers will get an increase in their personal tax exemptions.
President Arroyo yesterday signed into law Republic Act (RA) 9504, which amends the National Internal Revenue Code of 1987, in simple rites in Malacañang.
Under the new law, payments received by minimum wage earners for all holiday, night differential, hazard and overtime should be exempted from taxes.
It also increases personal exemptions for individual taxpayers to a flat rate of P50,000 from 20,000 for single employees, P25,000 for head of the family, and P32,000 for married workers.
Exemptions were also raised to P25,000 from P8,000 for each qualified dependent, with taxpayers allowed to declare up to four.
The law also provides additional deductions for qualified dependents. A family of six with two working spouses and four dependent children used to enjoy total exemptions of P96,000, but under the new law, will get P200,000 in exemptions.
The Department of Labor and Employment (Dole) 7 welcomed the development, saying the law will guarantee an increase in the workers’ take-home pay, especially that the P17 increase in the minimum wage took effect last Monday, June 16.
Regional Director Elias Cayanong told radio dyLA that the Regional Tripartite Wages and Productivity Board (RTWPB) was not mistaken in granting the P17 increase, given the adjustments in tax exemptions.
Dole 7 and the business sector, he added, will conduct a joint information drive for the uniform enforcement of the new wage increase, amid reports that several
employers did not even implement the old P250 minimum wage.
Present during the signing ceremony in Manila were Sens. Ramon “Bong” Revilla Jr., Juan Ponce Enrile, Francis Escudero, Richard Gordon and Manuel Roxas II, House Speaker Prospero Nogra-les and Reps. Exequiel Javier and Martin Romualdez.
The President, in a press release, said the new law is expected to help ease the impact of the continuing rise in oil and food prices.
Finance Secretary Margarito Teves said minimum wage earners have been exempted from withholding tax since January 2006, through Revenue Regulations 01-2006,
but with the signing of RA 9504, it now “formalized this tax exemption order for about 500,000 minimum wage earners both in the private and public sector.”
Teves said the government stands to lose P3.16 billion annually in tax revenues with the income tax exemption of minimum wage earners and P11.09 billion with the new personal exemption levels.
Government, however, could recover these losses with the imposition of optional standard deductions in filing business income tax returns, which is expected to generate about P15.03 billion. (Sunnex/EOB)
