For years, the Filipino middle class has quietly carried the Philippine economy.
They pay taxes automatically through withholding. They fuel domestic consumption. They support their families, finance education, purchase homes, and sustain millions of micro, small, and medium enterprises (MSMEs). Yet despite being among the country’s largest contributors to government revenues, they often receive the least direct relief whenever economic crises arise.
Recognizing this growing imbalance, Senate President Sherwin Gatchalian filed Senate Bill No. 56, otherwise known as the Granting Increase in Take-Home Pay for All Working Filipinos (GINHAWA) Act on July 1, 2025, as part of his priority legislative agenda for the 20th Congress. The measure seeks to modernize the country’s income tax system by increasing disposable income while providing targeted tax relief for workers and small businesses.
Unlike temporary subsidies or one-time cash assistance, the GINHAWA Bill proposes structural reforms that permanently allow Filipinos to keep more of what they earn.
Salient Features of the GINHAWA Bill
1. Increase the Tax-Free Annual Income Threshold
The bill raises the annual income exempt from personal income tax from ₱250,000 to ₱400,000.
This immediately reduces the tax burden on millions of salaried workers, allowing them to retain more of their earnings amid persistent inflation and rising living costs.
2. Increase the Tax-Free Bonus Ceiling
The measure increases the tax exemption for the 13th month pay and other bonuses from ₱90,000 to ₱150,000.
This enables employees to enjoy a larger portion of their bonuses without additional tax deductions, especially during the holiday season when household expenses are highest.
3. Exempt Additional Compensation from Income Tax
GINHAWA proposes that the following mandatory employee benefits be exempt from income tax:
- Overtime pay
- Holiday pay
- Night shift differential
- Hazard pay
- Service charges received by workers in the service industry
The proposal recognizes that these payments compensate employees for working longer hours or under more difficult conditions and should not be further reduced by taxation.
4. Tax Exemption for Poll Workers
The bill exempts the honoraria and allowances received by election workers from income tax, acknowledging their vital role in safeguarding Philippine democracy.
5. Tax Relief for Micro and Small Businesses
Beyond employee benefits, GINHAWA also introduces several reforms for MSMEs, including:
- Additional deductions for labor expenses incurred by micro taxpayers;
- Allowing discounts granted to senior citizens, persons with disabilities, and solo parents to be treated as tax credits; and
- Exempting qualified micro taxpayers from certain withholding tax requirements to simplify compliance.
Why the GINHAWA Bill Matters
The bill recognizes an important economic reality: increasing workers’ disposable income stimulates domestic demand.
When employees bring home more money, they spend more on food, housing, education, healthcare, transportation, and local businesses. This increased consumption supports economic growth while improving the quality of life of ordinary Filipino families.
At the same time, reducing unnecessary tax burdens improves tax fairness by giving relief to the very taxpayers who consistently comply with the law.
Looking Ahead
The GINHAWA Bill represents one of the most significant tax relief proposals currently pending in Congress. While its immediate objective is to increase take-home pay, its broader vision is to strengthen the middle class—the backbone of the Philippine economy.
As policymakers deliberate on the proposal, one equally important question remains: How should government responsibly recover the foregone revenue?
This is where complementary structural reforms become essential—strengthening tax administration, adopting the OECD Global Minimum Tax, modernizing revenue collection through a National Revenue Authority, and intensifying the audit of unexplained wealth and large-scale tax evasion.
Taken together, these reforms can ensure that increasing take-home pay is not merely a tax cut, but part of a fiscally responsible strategy that empowers Filipino workers, supports MSMEs, preserves investor confidence, and promotes long-term inclusive growth.
