The Tax Reform Act, A Decade Old

Republic Act 8424 (Philippine Law), otherwise known as the Tax Reform Act of 1997 or the Revised National Internal Revenue Code (NIRC) of 1997, which became effective in 1998, is already more than a decade old law. It’s basically a comprehensive law that covers all national taxes from income tax for individuals and corporations, estate and donor’s tax, value added tax, other percentage taxes, excise tax on certain goods, and documentary stamp taxes.

The law is old enough that, as a matter of fact, certain provisions have already been revised just like the income tax for corporations and the Expanded Value Added Tax. What marvels me is why there’s no change, or at least any proposed changes underway (none that I heard of), in income tax for individuals.

The Philippine taxation since 1997 provides for a graduated income tax rates for individuals (net of personal exemptions) as follows:

Not over P10,000 5%
Over P10,000 but not over P30,000 P500 + 10% of the excess over P10,000
Over P30,000 but not over P70,000 P2,500 + 15% of the excess over P30,000
Over P70,000 but not over P140,000 P8,500 + 20% of the ecess over P70,000
Over P140,000 but not over P250,000 P22,500 + 25% of the excess over P140,000
Over P250,000 but not over P500,000 P50,000 + 30% of the excess over P250,000
Over P500,000 P125,000 + 32% of the excess over P500,000

According to the National Statistics Office, average family income from 1997 to 2006 increased from P123,000 to P172,000. That represents around 40% increase during that 10 year period. Definitely, at least a bracket leap in the progressive tax table.

The 1997 Tax Code has always been biased against the individual income taxpayers, in a sense that unlike corporations, individuals cannot claim any other deductions aside from the fixed personal exemptions (while corporations have the ability to manipulate their earnings, thus the income tax, through dubious deductions and expenses–thanks to the vague law). And it’s old, outdated, obsolete!

RA 8424 superseded the three-year old NIRC of 1994, thus in itself, eleven years in effect and counting, it necessarily needs a major rewrite.

4 thoughts on “The Tax Reform Act, A Decade Old”

  1. May tanong lang ako,nagwork ako last May 2008, do we meed to file an annual income tax kahit di kami nag one year pa sa work namin? yung witholding tax ba namin from may to December isasauli dpat sa amin or from July up to December only? kasi we deducted witholding tax even nag implement sa Ra9504 yung company namin.I am waiting for the response.

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