MANILA, Philippines – With inflation still elevated and economic growth expected to slow sharply, President Ferdinand Marcos Jr. used his fifth State of the Nation Address to push wider tax relief for workers and small businesses, and lower electricity bills for consumers.

He also sought an “immediate amendment” to the Electric Power Industry Reform Act (EPIRA) to prohibit power distributors such as Meralco from passing system loss charges and the corresponding value-added taxes (VAT) on to consumers.

Business and taxes: Wider exemptions and amnesty

Marcos proposed raising the annual personal income tax exemption threshold from the current P250,000 to P350,000. Senate President Win Gatchalian also earlier stated that among the Senate’s priorities is a bill to boost workers’ take-home pay by raising the income tax exemption threshold to P400,000 annually while removing taxes on bonuses, overtime, holiday pay, night differentials, hazard pay, and service charges.

Marcos also called for the abolition of the minimum corporate income tax for small businesses. The tax is imposed on gross income when it exceeds the regular corporate income tax, potentially requiring companies to pay even when their taxable profits are low.

The President additionally pushed for an amnesty covering unpaid income, estate, donor’s, and VAT liabilities. Marcos did not explain how much revenue the government could forgo or how the tax reductions would be reconciled with its deficit and debt targets.

Energy: Consumers should not pay for system losses

Marcos’ call to remove system loss charges was among his clearest interventions on persistently high electricity prices.

System loss refers to electricity lost during transmission and distribution, including technical losses from power lines and equipment and nontechnical losses such as theft and meter problems. Under EPIRA, a portion is currently recoverable from consumers, subject to regulatory caps. (READ: Why your Meralco bill will be higher in July – and might rise again soon)

“Hindi naman kasalanan ng consumer kung bakit nagkaroon ng system loss. Kaya hindi naman tama na kailangan sila pa ang pagbabayarin dito (Systems loss is not the fault of the consumer. So it’s not right for them to have to pay for it),” Marcos said.

He called for EPIRA to be amended immediately to prohibit charging system losses to consumers, including the VAT imposed on those charges.

Removing the charge could reduce monthly bills, but Congress and regulators would have to determine who ultimately absorbs the cost. According to Meralco, system loss accounts for about 5% of a consumer’s electricity bill.

Beyond the proposal, Marcos said the government was monitoring almost 200 power projects with nearly 10,000 megawatts (MW) of capacity through 2028, plus more than 1,700 MW of energy-storage projects.

He also highlighted the discovery of an estimated 222 billion cubic feet of additional natural gas at Malampaya and said the resource could support continued production until 2034.

Trade and financial system: P6-trillion pipeline, lower fees

Marcos said the Philippines now has 23 free trade agreements either in force or under negotiation, including a planned comprehensive economic partnership agreement with the United Arab Emirates.

He said more than P6 trillion in investments had been facilitated through the government’s Green Lanes over the past three years, with the projects estimated to create more than 400,000 jobs. The amount represents investments endorsed or assisted through expedited processes, however, and does not necessarily mean all projects have been constructed, funded, or started commercial operations.

Marcos credited banks and e-wallets for lowering or removing digital transaction fees, and cited loan-payment extensions offered during the crisis. (READ: Banks are dropping transfer fees. Here’s why it took so long.)

What Marcos skipped: Inflation, slow economic growth

The most striking omission was inflation and the sluggish growth of the Philippine economy.

Marcos repeatedly discussed high fuel, food, electricity, and transport costs and the pressure they placed on household incomes. But he did not directly address inflation or explain the government’s outlook for consumer prices. Headline inflation remained high at 6.4% in June, which is well above the government’s target range of 2% to 4%.

There was also no substantial discussion of economic growth, unemployment, wages, poverty, the fiscal deficit, public debt, or the peso. Marcos didn’t mention the Philippines’ new status as an upper-middle-income country, which took the country nearly four decades to achieve. For context, days after achieving this milestone, the government’s economic managers cut growth outlook to only 3.5% to 4.5% in 2026.

Negros groups’ react

In Negros Occidental, several groups frowned over Marcos’ push to exempt workers earning up to P350,000 annually from income tax lacked consultation with stakeholders.

Carlo Oñate, spokesperson of the Trade Union Congress of the Philippines (TUCP), said, “This is not what we want actually. What we want is a P600,000 threshold or P50,000/month earning to be exempted from income tax.”

Oñate said the revenue gap should be addressed by taxing billionaires and large companies instead of ordinary workers. He added that Congress must consolidate competing proposals, including Senate President Sherwin Gatchalian’s “Ginhawa Bill,” which seeks a P400,000 annual income tax exemption.

“Reality check, therefore, is a must before deciding on the exact figure to be exempted,” he said. “Otherwise, the President’s pronouncement on tax exemption will only be classified as rhetoric.”

Roland de la Cruz, president of the National Congress of Unions in the Sugar Industry of the Philippines, said the announcement was not enough because it did not address wage increases.

“It didn’t even pass through a deep conversation with the labor sector,” he said.

De la Cruz said workers expected Marcos to discuss wage hikes amid rising costs but instead highlighted government assistance programs.

On Marcos’ proposal to provide zero tax for small and medium enterprises, Oñate said the measure was “quite impressive” but questioned whether its benefits would reach workers.

Frank Carbon, vice president of the Metro Bacolod Chamber of Commerce and Industry (MBCCI), opined that Marcos failed to sufficiently address unemployment, which has risen to 4.8%, or around 2.5 million jobless Filipinos.

“The labor market is failing to absorb displaced workers, particularly after climate anomalies caused a net loss of 905,000 agricultural and forestry jobs,” Carbon said. – with reports from Ambo Delilan/Rappler.com