Veto of Section 8 of Republic Act No. 11976

On 10 January 2024, the Bureau of Internal Revenue issued Revenue Memorandum Circular No. 3-2024, with Annex B thereof, circulating a copy of the Veto Message of the President of the Republic of the Philippines on Republic Act No. 11976 or the Ease of Paying Taxes Act (“EoPTA”). The President vetoed Section 8 of the EoPTA, which exempts micro taxpayers from the obligation to withhold creditable withholding taxes under Section 57(B) of the National Internal Revenue Code, as amended. A micro taxpayer, which is one of the new classifications of taxpayers under the EoPTA, refers to a taxpayer whose gross sales are less than PHP3,000,000.00.

The reasoning of the President for the veto is that removing the withholding tax requirement for micro taxpayers will result in an understatement of tax obligations which will negatively affect the cash flow of the government. With a 50% non-compliance rate based on a 2018 World Bank study, the President surmised that the exemption of micro taxpayers would cost the government PHP40.4 billion in 2024 alone and that the total estimated foregone revenue for 2024 to 2028 is approximately PHP206.4 billion. He added that the government cannot afford to lose such considerable revenue amid limited fiscal space at a time when the Philippines needs government support to maintain its economic growth momentum. 

The full text of the President’s Veto Message may be accessed here.