Higher taxes proposed to fund income tax cuts under DOF tax package

The government is eyeing higher taxes on sugary drinks, tobacco, vapes, plastics and certain vehicles to offset planned tax relief measures.

The government’s planned income tax cuts may come with higher taxes on sugary drinks, tobacco and vape products, plastics, and certain vehicles under a sweeping tax package proposed by the Department of Finance.

The proposal follows the government’s plan to raise the income tax exemption threshold to ₱350,000 from ₱250,000 and exempt some micro and small businesses from paying the minimum corporate income tax. The Department of Finance estimates these measures could reduce government revenues by ₱67.02 billion next year.

To help make up for the shortfall, the department wants to increase taxes on products it considers harmful to health or the environment, while also revising taxes on certain vehicles under what it calls a “wealth tax.” The package is projected to generate ₱112.44 billion in revenue next year if approved.

Finance officials said the proposal aims to keep the government’s finances on track while easing the tax burden on workers and smaller businesses. Economists, however, said the measures must be carefully designed to avoid discouraging spending and investment.

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