Marcos Proposes Expanded Tax Relief to Boost Take-Home Pay and Support Small Businesses

President Ferdinand Marcos Jr. has put forward a set of tax reform proposals aimed at expanding relief for Filipino workers, small enterprises, and taxpayers with outstanding obligations. During his fifth State of the Nation Address on July 27, Marcos called on Congress to enact legislation that would raise the income tax exemption threshold, exempt qualified small businesses from corporate income tax, and grant a tax amnesty covering various unpaid taxes.

Currently, under the Tax Reform for Acceleration and Inclusion (TRAIN) Law, individuals earning up to P250,000 annually are exempt from paying income tax. Those with incomes above this threshold are subject to graduated tax rates. Marcos’ proposal seeks to increase this exemption ceiling to P350,000 starting January 1, 2027, which would allow more workers to retain a larger portion of their earnings.

An employee earning P350,000 annually currently pays roughly P15,000 in income tax. If the proposed measure is enacted, such an employee would no longer be liable for income tax, effectively increasing their take-home pay. Senate President Pro Tempore Vicente Sotto III filed Senate Bill No. 2338, known as the Expanded Income Tax Exemption of 2026, to formalize this change.

The proposal is expected to benefit approximately 1.2 million additional workers who earn between P250,000 and P350,000 annually, raising the total number of tax-exempt employees to 6.3 million from the current 5.1 million. House Committee on Ways and Means chairperson and Marikina 2nd District Representative Miro Quimbo described the expanded exemption as a form of wage increase for middle-income earners, noting that it would increase take-home pay even if basic salaries remain unchanged.

Small businesses stand to gain from the proposed reforms as well. Under the CREATE MORE Act, most corporations pay a 25% corporate income tax, while qualified small corporations with net taxable income not exceeding P5 million and total assets below P100 million pay a reduced rate of 20%. Marcos’ plan would exempt these qualified small enterprises from corporate income tax entirely, easing their tax burden and potentially enabling them to reinvest in growth and job creation.

Another significant component of the proposal is a tax amnesty covering unpaid estate tax, income tax, donor’s tax, and value-added tax (VAT). This amnesty would also include penalties, surcharges, and interest, providing taxpayers with unsettled obligations an opportunity to settle liabilities at reduced rates. This measure aims to broaden the tax base and generate additional revenue for priority infrastructure and social programs.

Quimbo emphasized that the current P250,000 exemption threshold, established in 2018, has lost value due to inflation. Adjusting it to P320,000 would reflect inflationary changes, but Marcos’ proposal goes further by setting the threshold at P350,000 to benefit a wider group of taxpayers.

If approved by Congress and signed into law, these reforms would increase workers’ disposable income and improve cash flow for small businesses. The expanded tax exemption would effectively raise the net income of many employees, while the corporate tax exemption would reduce operational costs for small enterprises. The tax amnesty could also encourage compliance and help the government recover revenues from unpaid taxes.

Overall, Marcos’ proposed tax reforms seek to provide financial relief to millions of Filipinos, stimulate domestic consumption, and support the growth of small businesses by easing their tax obligations. The measures are currently pending legislative approval and would take effect starting in 2027 if enacted.