President Ferdinand R. Marcos Jr. (PCO photo)

President Ferdinand R. Marcos Jr.’s proposed tax measures could put more money into the pockets of Filipino workers and ease the burden on businesses, but the government may have to forgo about ₱53 billion in revenues in 2027 if the proposals are enacted.

During his penultimate State of the Nation Address (SONA), Marcos urged Congress to pass a law expanding personal income tax (PIT) exemptions, including for Filipinos earning up to ₱350,000 annually.

Currently, the government collects PIT on annual taxable income exceeding ₱250,000. Raising the exemption threshold would result in higher take-home pay for employed Filipinos.

Marcos is also pushing to exempt small businesses from the minimum corporate income tax (MCIT). This came alongside a call for a sweeping tax amnesty covering unpaid income, estate, donor’s, and value-added taxes (VAT).

China Banking Corp. (Chinabank) estimated that implementing these measures could reduce government tax collections by billions of pesos.

“We estimate that raising the personal income tax exemption threshold from ₱250,000 to ₱350,000 would result in direct revenue losses of around ₱53 billion in 2027,” Chinabank chief economist Domini Velasquez told Manila Bulletin on Tuesday, July 28.

While this represents a significant revenue loss, Velasquez said the proposed measures could support economic activity by boosting Filipino households’ disposable income and consumption.

Such a boost could lift gross domestic product (GDP) growth by around 0.12 percentage point (ppt). Domestic growth slowed to 2.8 percent in the first quarter of 2026, its weakest pace since the height of the Covid-19 pandemic.

On prices, Chinabank expects the inflationary impact of the tax measures to be limited. Once implemented, Velasquez estimated that they could add roughly 0.05 ppt to headline inflation.

Inflation peaked at 7.2 percent in April before easing to 6.8 percent in May and slowing further to 6.4 percent in June. Much of the elevated inflation during those months was attributed to surging oil prices caused by the blockage of the Strait of Hormuz.

“Given the Philippines’ sluggish growth momentum, the proposal could serve as a timely pump-priming measure by supporting consumer spending, which accounts for roughly three-fourths of the economy,” Velasquez said.

Reyes Tacandong & Co. senior adviser Jonathan Ravelas said the short-term revenue loss could be “significant,” but the current administration appears to be banking on stronger economic activity to boost tax collections over the longer term.

“While the short-term revenue loss could be significant, the administration appears to be betting that stronger economic activity and broader tax compliance will generate longer-term gains for the economy and government revenues,” Ravelas said.

Last year, the national government (NG) collected a record-high ₱4.08 trillion in tax revenues. This was about ₱280 billion, or 7.4 percent, higher than the ₱3.8 trillion collected in 2024.

Of the total, the Bureau of Internal Revenue (BIR) contributed ₱3.11 trillion, largely driven by collections from net income and profits amounting to ₱1.69 trillion.

Tax collections, which accounted for nearly 90 percent of the total first-semester haul, increased 5.4 percent to ₱2.14 trillion.

Of this amount, the country’s main tax collection agency collected ₱1.63 trillion, up five percent year-on-year, driven by “higher collections from corporate income tax, personal income tax, [12-percent] value-added tax (VAT), other percentage taxes, and miscellaneous taxes.”

However, this fell 1.4 percent short of its ₱1.65-trillion midyear target, according to the Bureau of the Treasury (BTr).

For Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), the tax proposals could lead to substantial losses in recurring government revenues over the near term.

“Although part of the losses may be offset by stronger economic activity, improved tax compliance, and one-off collections from the amnesty program,” he said.

Meanwhile, Asuncion cautioned that the eventual cost would depend “on how much the income tax exemption threshold is raised, the coverage of MSMEs [micro, small, and medium enterprises] that will qualify for exemption from the minimum corporate income tax, and the specific parameters of the tax amnesty program.”

For Asuncion, it bears asking not only how large the potential revenue loss could be, but also how the government intends to recover the forgone revenues “while remaining on track with its fiscal consolidation program and deficit reduction targets.”

According to the Cabinet-level interagency Development Budget Coordination Committee (DBCC), the government recalibrated its medium-term fiscal program amid “evolving macroeconomic conditions and geopolitical events that continue to reshape the country’s growth and fiscal outlook.”

Tax authorities are expected to collect ₱4.81 trillion in revenues in 2026, 8.1 percent higher than the actual ₱4.45 trillion collected in 2025. This year’s tax haul would translate into a tax effort of 15.8 percent, slightly lower than the 15.9 percent recorded in 2025.