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The income-tax exemption for minimum-wage earners is not retroactive
to the beginning of 2008, as the law will only take effect on
Sunday, the Bureau of Internal Revenue (BIR) said.
In a public hearing Tuesday, Nelson Aspe, deputy
commissioner, said the bureau cannot refund the income taxes from
January to June this year. He added that this issue has been
resolved with the lawmakers before President Gloria Arroyo signed
the exemption bill into law.
“Tax exemptions under the new law will result
in additional take-home pay of P34 a day or P750 a month for
minimum-wage earners and also increase personal exemptions for
salaried workers,” Aspe explained.
Under the law, the implementation of Republic
Act 9504 providing for the increase in personal and additional
exemptions of individual taxpayers and absolute exemption of
minimum-wage earners from income tax becomes effective on July 6.
Aspe said the agency is still drawing up revenue
guidelines, and that the bureau is concerned about clarifying all
the issues about the new law to the public.
He explained that only one-half of the total
amount of the personal and additional deductions can be deducted
from the income tax to be paid for this year. “[But] starting
January 2009, individual taxpayers can avail of the full personal
exemption benefits and additional deductions under the new law.”
More than half a million minimum-wage earners
will benefit from the new law, as the level of personal exemption
and deductions of individual taxpayers has been increased.
The new law also exempts holiday pay, overtime
pay, night-shift differential and hazard pay from income tax of
minimum-wage workers. But if the individual worker earns income
other than his compensation income, then his income would be subject
to tax.
The new law, which increases the personal
exemption of single taxpayers from P20,000 to P50,000; head of
family, P25,000 to P50,000; and married, P32,000 to P50,000 with the
deduction of each qualified dependent, not exceeding four, is
increased from P8,000 to P25,000.
The Department of Finance had said the measure
would cost the government around P14.25 billion in foregone
revenues, but the law imposes “optional standard deductions “ or
OSD, estimated to generate P15.03 billion, to make up the
difference.
The law allows certain optional standard
deductions in filing business income tax returns, which is a
40-percent deduction based on gross sales or receipts in the case of
those self-employed and professionals; for corporations, also 40
percent.
The optional standard deduction is expected to
encourage businesses in the underground economy to pay taxes,
according to the bureau.
“[The] key challenge for the BIR and the
government is to keep the measure revenue-neutral, considering
current pressures brought about by the global economic slowdown and
high oil and food prices,” Aspe said.
-- Chino S. Leyco
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