What It Means
- The Marcos tax relief package raises the personal income tax exemption threshold to P350,000, exempts qualified small businesses from corporate income tax, and offers amnesty on unpaid national taxes and penalties.
- Days before the announcement, the Development Budget Coordination Committee cut the Bureau of Internal Revenue’s 2026 collection target by P38 billion and lowered the government’s own growth forecast.
- Economists from De La Salle University and Ateneo de Manila University warn the package risks worsening an already widening budget deficit, since no offsetting revenue measure was named alongside it.
- The financing gap, if left unaddressed, pushes the government toward heavier borrowing, with the deficit projected to stay wide through 2028.
For workers watching their paychecks shrink against high prices, and small business owners counting every peso against thin margins, the Marcos tax relief package landed like something rare this year: a piece of good news. In his fifth State of the Nation Address, President Marcos called on Congress to raise the tax free threshold, cut the corporate burden on small enterprises, and forgive unpaid taxes and penalties. Economists reacted within a day, and the reaction was blunt. The package may not survive contact with a revenue base that was already shrinking before anyone said a word about relief.
The New Exemption Threshold And Amnesty Terms
The Marcos tax relief package would raise the personal income tax exemption from P250,000 to P350,000 annually. Under the current graduated schedule, income above P250,000 but not exceeding P400,000 is taxed at 15 percent of the excess over P250,000. A worker earning exactly P350,000 a year currently owes P15,000 in income tax. Under the new threshold, that liability disappears, though the final computation depends on what Congress passes.
The package also exempts qualified small businesses from corporate income tax and grants amnesty covering unpaid income, estate, donor’s, and value added taxes, along with the penalties attached to them. Both provisions were framed as support for households and small operators absorbing the cost of the Middle East oil crisis, and both drew the loudest applause in a speech that otherwise spent little time on hard economic numbers. For a country working through elevated inflation and a minimum wage hike that took effect two days before the SONA, the Marcos tax relief package read as a genuine bit of relief, not a political throwaway line.
The Revenue Base Was Already Shrinking
What makes the Marcos tax relief package harder to defend is timing. On July 10, the Development Budget Coordination Committee lowered the BIR’s 2026 collection target by P38 billion, to P3.393 trillion, after cutting its own economic growth forecast to 3.5 to 4.5 percent from an earlier 5 to 6 percent. That downgrade happened weeks before the SONA, not after it. The government was already telling itself that less money was coming in before it proposed a package that brings in less money still.
A relief measure proposed against a stable revenue outlook is a straightforward political calculation. One proposed weeks after the government’s own economic managers cut their collection target and downgraded growth is different, since the cost of the promise and the shrinking capacity to pay for it arrived in the same month.
UnionBank chief economist Ruben Carlo Asuncion said the real test is whether foregone revenue gets offset by stronger tax administration and collection efficiency, since neither was detailed in the speech.
Two Universities, One Warning
De La Salle University economist Maria Ella Oplas did not soften her assessment of the Marcos tax relief package. She called it fiscal suicide for the administration, and asked where the government would find funds for its expenditures if not through borrowing. She argued the state should instead close or restructure underperforming government corporations and recover stolen public funds before reaching for new relief.
Ateneo de Manila University economist Alvin Ang agreed the measures serve as a useful short term safety net, but said the missing piece is a plan for fiscal sustainability. Fellow Ateneo economist Leonardo Lanzona went further, arguing that the SONA deferred the financing question to Congress entirely, shifting the burden of an unpopular tradeoff onto legislators only after the political credit for the promise had already been claimed.
Amnesty Sits Uneasily Next To Enforcement
The tax amnesty is where the Marcos tax relief package gets structurally awkward. It forgives penalties for taxpayers who did not file or pay correctly, at the same time BIR enforcement mechanisms like the Letter of Authority process remain a documented corruption hotspot. A taxpayer who paid on time gets a modestly higher exemption threshold. A taxpayer who did not gets forgiveness on what they owed. Repeated often enough, that pattern teaches noncompliance is the cheaper bet.
The Deficit Does Not Wait For Congress
The DBCC’s own numbers show the 2026 budget deficit widening to P1.658 trillion, or 5.4 percent of GDP, up from an earlier P1.611 trillion projection. That gap is expected to stretch to P1.695 trillion in 2027 and P1.722 trillion in 2028 before narrowing. None of the provisions in the Marcos tax relief package came with a matching revenue offset, which means the national budget absorbs the cost of relief on top of a deficit trajectory already widening before the speech.
Lanzona’s framing is worth sitting with. An address that defers the financing accounting to Congress shifts the burden of an unpopular tradeoff onto legislators after the political credit for the promise has already been banked by the executive. The workers and small business owners who felt real relief this week are not the ones who will answer for how it gets paid for. That question moves to a Congress that did not deliver the applause line, and possibly to whichever administration is still in office when the deficit stops widening on schedule.
The Marcos tax relief package offers real relief to workers and small businesses squeezed by a hard year. It also lands on a revenue base the government itself has already marked down, and a deficit already projected to widen for three more years. Whichever administration inherits that gap will do so after the applause has already faded.
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