he Department of Finance (DOF), together with the Bureau of Internal Revenue (BIR), has proposed measures to reduce the tax burden on Filipino workers and raise the limits on tax-free compensation.

Under the proposal, the DOF seeks to increase the tax-exempt ceiling on private employees’ monetized and unused vacation leave credits from 10 days to 12 days.

The plan also recommends raising the tax-free limits for certain employee benefits: actual medical assistance from P10,000 to P12,000 monthly; employee achievement awards from P10,000 to P12,000; and laundry allowance from P300 to P400 monthly.

Additionally, the tax-exempt cap for uniform and apparel allowance would increase by P1,000 to P8,000, while rice subsidies would rise to P2,500 per month or the corresponding market value. The medical cash allowance for dependents would also go up to P2,000 per semester.

Global tax policy expert and Asian Consulting Group (ACG) Chief Tax Advisor Mon Abrea called the move “a step in the right direction toward a more inclusive and equitable tax system.”

However, Abrea emphasized that the government should also consider raising the income tax exemption threshold from P250,000 to at least P400,000 to P500,000 for middle-income earners, whom he described as “the backbone of the Philippine economy” facing increasingly harsh living conditions.

“A fair and data-driven adjustment will not only increase disposable income but also boost consumer spending, improve tax compliance, and promote inclusive growth. Genuine tax reform must always balance fiscal responsibility with compassion,” Abrea said.

Abrea, through ACG, advocates for simpler, fairer, and more sustainable tax policies by collaborating with government agencies, business chambers, and development partners to safeguard the Filipino workforce and strengthen investor confidence.