An Act Exempting Dividends From Income Tax And Abolishing The Improperly Accumulated Earnings Tax, Amending For This Purpose Sections 42(B), 25(A), 32(B) And 57(A), And Repealing Section 29 Of The National Internal Revenue Code Of 1997, As Amended

• This proposed measure seeks to exempt dividends from income tax and abolish the improperly accumulated earnings tax. 
• In our jurisdiction, the revenues generated by every corporation may be subjected to either the value-added tax (VAT) or percentage tax and the same revenue is also subject to local business tax. The taxable net income of a corporation is subject to corporate income tax and the same net income once declared and distributed as dividends, the recipient shareholders also pay a final tax.
• The imposition of tax on dividends disincentivizes businessmen and investors to further expand their businesses through the establishment of a corporation. Taxing twice the same income stream of a corporation would constitute inequitable distribution of tax burden. 
• Hence, exempting dividends from income tax is only fair, just and reasonable to minimize the inequity in tax burden sharing between and among all subjects of taxation. 
• This is in line with the constitutional mandate that the rule of taxation shall be uniform and equitable. 
• Likewise, abolishing IAET is only proper for it serves no purpose at all if dividends are no longer subject to income tax.

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