MANILA — A senator is urging the immediate passage of a tax relief measure aimed at increasing workers’ disposable income as Filipinos continue to struggle with rising prices.

The proposed Granting Increase in Take-Home Pay for All Working Filipinos Act, or GINHAWA, seeks to amend the National Internal Revenue Code by raising the income tax exemption threshold from P250,000 to P400,000 annually.

The bill aims to provide “equitable relief to a greater number of taxpayers and their families” by boosting disposable income and stimulating economic activity.

“The middle class has been the lifeblood of the local economy, driving domestic consumption and contributing significantly to government revenue,” Sen. Sherwin Gatchalian said in a statement Tuesday, May 5.

Gatchalian reiterated that the middle class plays a key role in sustaining economic activity through consumption and tax contributions.

He issued the call as the government reported that headline inflation rose to 7.2 percent in April, the fastest pace since March 2023. The increase was attributed in part to global oil supply disruptions following attacks involving the United States and Israel on Iran.

Under the bill, individuals earning up to P400,000 annually would be exempt from income tax, while higher earners would be subject to a revised graduated tax system.

The measure also proposes increasing the tax-exempt ceiling for 13th month pay and other benefits from P90,000 to P150,000.

It further seeks to exclude from taxable income several forms of compensation mandated under the Labor Code, including overtime pay, night shift differentials, hazard pay, holiday pay, and service charges, although overtime pay exceeding P100,000 would remain taxable.

For service workers, distributed service charges would be exempt from tax. Election workers would also benefit from exemptions covering honoraria, allowances, service credits, and other poll-related compensation.

The proposal also includes adjustments to fringe benefit taxation, shifting some benefits from a flat 35 percent final tax to inclusion under graduated income tax rates, while exempting employer-paid insurance premiums from fringe benefits tax.

For micro enterprises, the bill would allow an additional 50 percent deduction on employee compensation expenses and exempt them from withholding tax obligations.

It also proposes raising the VAT-exempt threshold for businesses from P3 million to P4 million in gross annual sales, with future adjustments tied to inflation beginning January 1, 2029.

Gatchalian said the measure aims to give workers “financial space” as households face higher living costs.

The bill’s explanatory note cited “rising prices of essential commodities” and economic uncertainty as key pressures affecting Filipino families’ ability to manage their finances.