Philippines finance department presses ProGRESS tax package approval as inflation squeezes households

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Philippines ProGRESS tax reform

Highlights

Department of Finance pushes Congress to pass the ProGRESS tax reform package by end-2024 to raise disposable income amid persistent inflation.
ProGRESS proposes raising the personal income tax exemption to P350,000, abolishing the minimum corporate income tax for MSMEs, and expanding excise taxes, aiming to generate P47 billion additional annual revenue.
2027 Budget of Expenditures projects tax revenue rising 9.2% to P4.85 trillion in 2027 and 8.5% to P5.26 trillion in 2028, with ProGRESS potentially included if legislative progress continues.

Tax package timeline and core measures

As reported by BusinessWorld Online, the Department of Finance is urging Congress to pass the Promoting Growth, Revenue, and Equity towards Socio-economic Sustainability, or ProGRESS, tax reform package next year, with Finance Undersecretary Karlo Fermin S. Adriano saying the measure is needed to raise disposable income for the working class amid high inflation.

Adriano says the bill, filed by Albay Rep. Adrian E. Salceda, is still pending at the House Ways and Means Committee. He says the department is coordinating with committee chair and Marikina Rep. Romero "Miro" S. Quimbo, and that the latest communication indicates the Lower House could pass the bill by the end of the year.

Under the proposal, the DoF wants to raise the personal income tax exemption threshold to P350,000 and remove the minimum corporate income tax for micro and small enterprises. The package also seeks higher excise taxes on sweetened beverages, tobacco, alcohol, automobiles and nonessential goods, alongside a new excise tax on plastics.

DoF estimates show the package would generate about P47 billion in additional net revenue each year once enacted. Adriano says some bills covering parts of ProGRESS have already cleared the committee level, but the department opposes approving them separately and continues to push for consolidation into one package.

Budget implications and wider fiscal impact

Adriano says the Development Budget Coordination Committee may need to revisit revenue targets as the package moves through Congress, but adds that ProGRESS is not yet included in the revenue program because it is still far from final legislative approval. He says a tax bill is added to revenue projections only when it is already in an advanced stage and there is a high degree of certainty that it will be enacted.

Under the 2027 Budget of Expenditures and Sources of Financing, the government projects tax revenue to rise 9.2% to P4.85 trillion in 2027 from a projected P4.44 trillion this year, then increase another 8.5% to P5.26 trillion in 2028. Adriano says ProGRESS could be included in the 2028 BESF if the measure makes enough headway.

The department is continuing stakeholder consultations into next year, including a January consultation in Davao City. Adriano says concerns about corruption raised in earlier discussions are being addressed through efforts to modernize the Bureau of Internal Revenue and the Bureau of Customs, with the aim of reducing human intervention in revenue collection.

The debate comes after a corruption scandal last year involving nonexistent and substandard flood control projects tied to officials, lawmakers and contractors. That episode has slowed government spending, weighed on investor and consumer confidence, and dampened economic activity.

In our earlier article on Malaysia’s need to strengthen its fiscal buffers after Budget 2027, we noted warnings that recurring global shocks and a prolonged period of high interest rates could strain government finances. The piece highlighted limited fiscal space due to heavy operating expenditure and pointed to measures such as broadening the tax base and refining targeted fuel subsidies to support fiscal flexibility and consolidation.

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