EXPLAIN THE IDEA ABOUT GIVING TAX EXEMPTION AND WHAT DO YOU THINK IS

WRONG AND WHAT IS RIGHT ABOUT IT?

Tax exempt refers to income earnings or transactions that are free from tax at the
federal, state or local level. When a taxpayer earns wages or sells an asset for a gain, that
individual is creating a tax liability. While a tax deduction refers to an amount that reduces
a tax liability, a tax-exempt item is excluded from any tax calculations.
(www.investopedia.com)

According to Section 23, Chapter II, Title II of Tax Reform Act of 1997, (a) A citizen
of the Philippines residing therein is taxable on all income derived from sources within and
without the Philippines; (b) A nonresident citizen is taxable only on income derived from
sources within the Philippines; (c) An individual citizen of the Philippines who is working
and deriving income from abroad as an overseas contract worker is taxable only on income
derived from sources within the Philippines: Provided, That a seaman who is a citizen of
the Philippines and who receives compensation for services rendered abroad as a member
of the complement of a vessel engaged exclusively in international trade shall be treated
as an overseas contract worker; (d) An alien individual, whether a resident or not of the
Philippines, is taxable only on income derived from sources within the Philippines; (e) A
domestic corporation is taxable on all income derived from sources within and without the
Philippines; and (f) A foreign corporation, whether engaged or not in trade or business in
the Philippines, is taxable only on income derived from sources within the Philippines.

However, Bureau of Internal Revenue exempts some individuals from filing their
income tax returns (ITRs). These individuals are those who are minimum wage earners,
whose gross income do not exceed the personal and additional exemptions dictated by
has been subjected to final withholding tax filed by the employer, who are BIR, whose
annual salary from just one employer will not exceed P60,000, whose income qualified
under "substituted filing." Moreover, self-employed employed individual who are
categorized as marginal income earners (MIEs) are still subjected to pay for income tax,
but are exempted from business taxes such as value added tax and percentage tax.
Provided, these MIEs are individuals whose businesses do not exceed P100,000 in annual
gross sales or receipts, individuals who are not deriving income from an employer,
individuals whose activities should be principally for subsistence or livelihood, such as:
farmers/fishermen, selling directly to consumers, small sari-sari stores, small carinderias or
"turo-turos", drivers/operators of a single-unit tricycle. (www.rappler.com)

Tax exemption benefits a lot of Filipino people, particularly those who are minimum
wage earners, for it is a great help for them to save some extra money, instead of paying
taxes. Saving money is so much essential these days because expenses for commodities
have visibly gone high. But, in someway, tax exemption is wrong when not executed
properly to individuals who are not aware of it. Government has to make sure that its
jurisdiction is fully aware about the bracket system of taxing the people.