MANILA, Philippines?A tax relief package that President Gloria Macapagal-Arroyo signed into law Tuesday is expected to result in daily savings of P34 for each of the country?s more than a million minimum wage earners, according to the principal authors of the measure.

Republic Act No. 9504 exempts minimum wage earners in the private sector and their counterparts in the public sector (casual employees) from paying income tax.

Minimum wage earners (or those paid the statutory minimum wage fixed by the regional wage boards) receive P382 daily in Metro Manila, and from P180 to P320 in other regions.

The law, which no longer requires minimum wage earners to file income tax returns, also increased the personal exemptions of other earners.

Other benefits?holiday, overtime, night shift differential and hazard pay?are exempted from income tax upon the effectivity of the law 15 days after its publication.

The President, who was visibly pleased with the new law, said it was part of government?s ?immediate? help to Filipino families reeling from soaring prices of oil and rice.

A family of five living in Metro Manila should earn more than P10,000 a month to stay out of poverty, according to the National Statistics Coordination Board (NSCB). The amount is 16 percent more than the poverty line two years ago.

Personal exemptions up

The law increased the amount of personal exemption from P25,000 to P50,000 for all taxpayers regardless of status (single, married or head of the family), and the additional deduction for qualified dependents from P8,000 to P25,000.

Thus, a family of six, with two working spouses and four dependent children, will have a total of P200,000 in personal exemptions (from the current P96,000).

In case only one of the spouses is earning, he or she shall be allowed the standard personal exemption of P50,000.

The law defines a ?dependent? as a ?legitimate, illegitimate or legally adopted child? living with the taxpayer and not more than 21 years old, unmarried and not gainfully employed.

These provisions eliminated the old tax bracketing system under the 1997 National Revenue Code, as amended, which had specified tax exemption of P20,000, P25,000 and P32,000 for single, head of the family and married, respectively.

Senate?s principal author

The new law amended Sections 22, 24, 34, 35, 51 and 79 of Republic Act No. 8424 (National Revenue Code).

?The House focused on increasing exemptions, (while) my bill in the Senate essentially focused on exempting minimum wage earners,? said Sen. Manuel Roxas II, the principal author in the chamber. He and his co-author, Sen. Richard Gordon, attended the signing ceremony in Malacañang.

?The impact there will be to ease the burdens of minimum wage earners because it will give them hefty deductions,? Gordon said. He, nevertheless, encouraged workers to save and ?become entrepreneurs.?

Other lawmakers who witnessed the signing were Senators Ramon Revilla Jr., Juan Ponce Enrile and Francis Escudero, House Speaker Prospero Nograles and Representatives Exequiel Javier of Antique and Martin Romualdez of Leyte.

Revenue impact

?The origin of this (act) was really intended for the minimum wage earners, but Congress decided to expand it to include middle-income earners, so we had to request them to assist us, to help us make sure that we arrive at a revenue-neutral situation,? said Finance Secretary Margarito Teves, who attended the signing.

Teves placed at P3.16 billion the foregone revenue from the tax exemption of minimum wage earners and at P11.1 billion the personal exemptions of medium-income earners?a total of P14.2 billion annually.

?That is now the challenge for us to generate the compensating revenues from those two sources (individuals and corporations) to arrive at a revenue-neutral situation,? said Teves, who acknowledged that the task would not be easy.

Consumption to go up

He said the government would have to convince individual taxpayers and corporations ?to assist us. So we will probably review from time to time how we are implementing the law in terms of generating revenues.?

Teves expected domestic consumption to go up as low- and -middle income earners would have more money in their pockets.

?There will be a net addition in terms of money in circulation and that will help generate jobs, and the economy will also be on the road to some improvement,? he said.

Optional deductions

The Department of Finance hopes to recover the revenue losses from the imposition of optional standard deductions, Teves said.

The law also provides other taxpayers optional standard deductions in filing business or income tax returns.

For the self-employed and professionals, the law gives them an optional standard deduction of 40 percent of gross sales or gross receipts, and 40 percent of gross income for corporations.

Teves said the imposition of optional standard deductions simplified the filing of income tax returns for professional and medium, small and micro enterprises, thus increasing tax compliance.

The finance department expects to gain P15.03 billion from the optional standard deductions.

 PERSONAL EXEMPTIONS

Before (in pesos) Now (in pesos)

 Single 20,000 50,000

 Head of Family 25,000 50,000

 Married 32,000 50,000

 Each Qualified Dependent

 (Not exceeding 4) 8,000 25,000

 Family of 6 (Two working spouses,

 4 dependent children) 96,000 200,000