• Labor law violators, likely tax cheats, too

    Ernesto F. Herrera

    Ernesto F. Herrera

    Sen. Ralph Recto recently filed Senate Bill 256, which seeks to raise the tax exemption ceiling of bonuses to P75,000, up from the present P30,000 set by law (Republic Act 7833) some 30 years ago.

    This is quite commendable considering the 13th month pay is given only once a year anyway and is much needed by workers to boost their incomes.

    But before we raise the tax exemption on bonuses let us first make sure that employers are rightfully paying them and other benefits due to workers by law.

    The Bureau of Working Conditions inspects thousands of firms every year, and up to 20 percent of them are found underpaying the minimum wage, depriving workers their 13th month salary and overtime pay. Other firms are found cheating their employees of their extra pay for work on holidays, or unlawfully withholding their Social Security System, PhilHealth and Pag-Ibig premiums.

    Christmas has come and gone but instead of thanking their workers for their hard work and their contributions, a lot of these employers and businesses did just the opposite. These labor violators should be exposed and prosecuted to the full extent of the law.

    The Labor department has to be stricter in implementing our labor laws or else many workers would continue to get Scrooged. It hasn’t been a very merry Christmas for them. And if things don’t change, it won’t be a prosperous new year either.

    The Bureau of Internal Revenue should also investigate thousands of firms found underpaying their workers and violating other general labor standards, because they are potential tax dodgers too.

    Firms that defraud their workers of lawful wages, or deprive them their social security protection and other statutory benefits, are several times more likely to be cheating as well in their tax payments.

    On the other hand, firms dutifully complying with labor standards are several times more likely to be truthfully declaring their income and responsibly paying their tax liabilities.

    The BIR should immediately audit the erring firms for possible non-payment or underpayment of their tax obligations.

    The administration’s stepped up drive against tax evasion is very commendable.

    The Department of Finance and the Department of Justice have been filing at least two criminal charges every week against suspected tax dodgers and smugglers.

    But for sure many more are out there. Like I said, if these firms could shortchange and cheat their employees, they could surely do the same to the government and the consumers.

    Besides overpricing and producing substandard goods and services at the expense of consumers, there are only two ways by which unscrupulous firms cut corners to rake in excessive profits—by shortchanging workers and cheating on taxes.

    In the interest of fair play, the Department of Trade and Industry and the Department of Labor and Employment should combine forces in ensuring the rigorous enforcement of, and compliance with new regional minimum wage rates and other labor regulations.

    Firms that underpay their workers, or violate other labor standards compete wrongfully and unfairly with law-abiding establishments that are properly compensating their employees.

    We recognize that every business is entitled to earn a reasonable profit. However, respect for basic labor rights should form part of the framework within which every business must compete freely and honorably.


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    1. Our office monthly tax deductions are more than what the BIR prescribes. They compute the withholding tax prior to deducting the mandatory deductions such as SSS, Philhealth and Pag-ibig contributions. So our mandatory contributions are also “taxed” by our employer. I have my payslips as proof.

    2. Much of this article I agree with. Many businesses in my City—-maybe most—underdeclare their income and profits. The BIR seems only too willing to “negotiate” on taxes due, when they should insist on full payment. When I challenge these businessmen, they laughingly admit to the fraud (although they do not like this term), and claim they fail to pay their full dues as they have no confidence that the revenues will be properly used, and much of it stolen! This may be a weak justification, but it is a consequence of corrupt government. Incidently, these same people are often very generous on their own account.
      As for exempting bonuses from tax, there is no case for this at all. As long as the ridiculous system of 13th month and other bonuses continues, it should be seen for what it is. It is defered wages which workers are supposed to feel grateful for! It is income, pure and simple, and it should all be taxable with NO exemptions.

    3. Mr. Herrera may I opine that wages should be dictated by supply and demand like any goods or services. Since there are tremendous oversupply of working age pinoys graduate or not skilled or not that will be the result. Add to this is too much taxes imposed on goods from raw materials to finished goods that is only being pocketed by the 3 branches of govt for which you are a part up to now. Anyway the workers are amply protected thru the issuances of the confusing mandated wage increase which can only be followed truthfully by the Cartels/Monopolies the continuing labor hearings will never stop as ordinary enterpreneur/businessmen have hardtime themselves dodging mostly unrerasonable national and local laws adding more fees for simple documents.