- President Marcos proposed increasing the tax-free income threshold to three hundred fifty thousand pesos annually.
- The measure targets middle-class relief as inflation reached six point four percent in June twenty twenty-six.
- Revenue losses might be offset by higher taxes on unhealthy goods according to the economic team.
President Ferdinand R. Marcos Jr. urged Congress on Monday to expand the Philippines’ tax-free income threshold to P350,000 a year, saying the change would give middle-class workers more room in their paychecks. He made the proposal during his fifth State of the Nation Address on July 27, 2026.
The current threshold under the TRAIN Law is P250,000. If lawmakers approve the proposal, the minimum taxable annual income would rise by P100,000.
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Marcos presented the measure as part of a wider tax-relief package. It also includes lower income tax for other workers, relief for small businesses and a proposed amnesty for taxpayers with unpaid obligations.
“Una, palawakin natin ang exemption sa income tax. Dagdagan natin ang mga manggagawang malilibre sa buwis sa kanilang kita. Isasama na natin ang mga kumikita nang hindi lalagpas sa P350,000 kada taon.”
The president called for Congress to act on the proposal. The higher income tax exemption would therefore require legislative approval before it could take effect.
Speaker Faustino “Bojie” Dy III said the House supports the call and will study measures allowing Filipino workers to keep more of their earnings. Rep. Miro Quimbo, chairman of the House Committee on Ways and Means, said the panel would immediately begin deliberations on the proposed Middle Class Tax Relief Act.
The change would primarily affect workers earning from P250,000 to P350,000 annually. The research describes that group as paying a 20% tax on income above P250,000 under the current structure; under the proposal, they would pay zero income tax on those earnings.
That range corresponds to roughly P21,000 to P29,000 per month. Millions of Filipino workers are estimated to benefit through higher take-home pay.
The tax proposal arrives as inflation and fuel costs pressure households
Inflation reached 6.4% in June 2026, driven by global oil shocks. The government has also been dealing with a Middle East fuel crisis.
Regional conflicts led the Philippines to declare a National Energy Emergency. The government suspended excise taxes on LPG and kerosene to cushion consumers from higher fuel costs.
Marcos paired the income-tax proposal with a separate electricity measure. He called for the removal of “system loss” charges and the 12% VAT from monthly electricity bills.
Those proposals sit alongside business and tax-arrears measures. Marcos called for removing the minimum corporate income tax for micro and small enterprises, a step aimed at supporting local business growth.
A proposed tax amnesty would cover unpaid income, estate, donor and value-added taxes. The plan would also waive related penalties and fines.
Balisacan says the government is considering new revenue sources
Secretary Arsenio Balisacan of the Department of Economy, Planning, and Development said Cabinet and the economic team had discussed how to replace revenue lost through the relief measures.
“We did discuss already among the Cabinet, the economic team, how to fund or replace those revenues foregone. one proposal to get more taxes is to instead increase tax on unhealthy goods.”
Balisacan serves as the first secretary of DEPDev. The department replaced the National Economic and Development Authority after its reorganization under Republic Act No. 12145, passed in early 2025.
The revenue question forms part of the legislation now moving toward committee review. Quimbo’s panel is expected to examine the Middle Class Tax Relief Act while lawmakers consider measures that could fund or replace foregone collections.
Critics want a higher ceiling as supporters back regional recovery
Rep. Antonio Tinio of the ACT Teachers Party-List called the proposed P350,000 cap a “band-aid solution.” He urged lawmakers to raise the threshold to P500,000, citing the higher cost of living in 2026.
The House has expressed support, but the proposal’s final terms will depend on congressional deliberations. The package could affect workers, small enterprises and taxpayers with unpaid liabilities through separate measures.
Cebu Governor Pamela Baricuatro and Lapu-Lapu City Mayor Ma. Cynthia “Cindi” King-Chan issued statements on July 27 endorsing the tax reforms as necessary for regional economic recovery.
The announcement also came during a broader anti-corruption campaign. Marcos reported that nearly P25 billion in assets connected to the “flood control scandal” had been recovered, frozen or preserved, with P800 million already returned to the National Treasury.
Former House Speaker Ferdinand Martin G. Romualdez resigned on September 17, 2025, after a multi-billion-peso scandal involving “ghost” flood control projects. Marcos said the Ombudsman was preparing “multiple cases” against the former speaker.
The immediate legislative step is committee action on the proposed Middle Class Tax Relief Act. Balisacan’s revenue options, including higher taxes on unhealthy goods, will also enter the debate as Congress considers the package.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.
