DOF: Don’t raise income tax ceiling for bonuses

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Various bills filed in the Congress, which proposes hikes in the income tax ceiling for bonuses such as 13th month pay, may hinder the government’s goal to improve its tax collection by 2016, according to the Department of Finance (DOF).

“The Philippines is still on deficit spending. The passage of these proposals will derail our deficit spending program of 2 percent of GDP [gross domestic product]in 2016, in the process wipe out the revenue gains from sin taxes that the country worked for 16 years to pass, and jeopardize our social spending commitments, especially for the rehabilitation for calamity-stricken areas and infrastructure,” Finance Secretary Cesar Purisima said in a statement on Thursday.

The Finance department is opposing the different bills currently filed in the House of Representatives and the Senate which provide income tax relief to taxpayers, by raising the ceiling on the 13th month pay and other benefits under the National Internal Revenue Code, or the Tax Code.

The DOF noted that the proposals aim to increase the current P30,000 ceiling to a range of P40,000 to P75,000, which would result in foregone revenues of P10.3 billion to P 61.7 billion.


The agency explained that without countervailing revenue measures, the proposed bills will severely curtail the administration’s bid to improve tax to GDP ratio to 16 percent by 2016, and rob important social spending commitments of much-needed funding.

Purisima also highlighted that taxpayers will be adversely affected by a government without the fiscal resources to provide for basic social services caused by the potential revenue leak of up to P61.7 billion.

He added for example, the foregone revenues of P61.7 billion could almost fully fund the expansion of the Pantawid Pamilyang Pilipino Program to P62.6 billion, which provides direct immediate support to poor households with irregular income.

“If the legislative proposals are passed, and additional revenue measures would take another decade to pass, then the country is in danger of going back into the vicious cycle of fiscal mismanagement. Historically, countervailing revenue measures have been much harder to pass in Congress since increasing taxes is not popular. But the DOF was not made to be popular; it was made to be responsible for the country’s economic health,” Purisima said.

Furthermore, the DOF stated that the government has given generous relief to taxpayers, with previous reforms that have increased their personal and additional exemptions by up to 456 percent, much higher than the 157 percent adjusted value for inflation since 1994.

“The government has not been remiss in its duty to look after the plight of the taxpaying salaried workers who, incidentally, comprise the bulk or 82 percent of the total internal revenue collection from individual income taxes in 2012. They have already been granted generous tax subsidies even with the continuous deficit that the government had experienced before,” Purisima said.

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