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When President Gloria Arroyo signed Republic Act 9504 into law less
than three months ago, the government announced that it was giving
immediate financial relief to low-income workers. However, the
agencies—led by the Bureau of Internal Revenue (BIR)—that
drafted the law’s implementing rules and regulations (IRR) seem
determined to torpedo this widely applauded piece of social
legislation.
The proposed IRR not only sets the effectivity
of RA 9504 to July next year—thus contradicting the law’s avowed
aim of providing “immediate” financial relief. It also provides
an entire maze of bureaucratic procedures that would tend to
discourage companies and their employees from complying with RA
9504.
So distressing is the proposed IRR that some of
country’s biggest business groups were reported to have joined the
Tax Management Association of the Philippines Inc. (TMAP) in asking
the government to revise the draft implementing provisions of the
tax-relief package law.
According to the TMAP, the proposed IRR could
“negate the law’s original purpose to grant timely relief to
workers and could hurt productivity and needlessly burden
employers.”
Enacted on June 17 amid calls to protect workers
from the inflationary effects of rising food and fuel prices, RA
9504 exempts an estimated 500,000 minimum-wage earners (MWEs) from
income-tax payments.
RA 950 also increases the level of personal
exemptions and deductions of individual taxpayers. The personal
exemption of single taxpayers was raised from P20,000 to P50,000;
heads of families from P25,000 to P50,000; and married employees
from P32,000 to P50,000.
According to a report published in the
BusinessMirror Wednesday, TMAP president Laura Yuson-Layug branded
parts of RA 9504 as “contrary to law and jurisprudence.” She
said as much in a letter to Finance Secretary Margaito Teves.
Similar objections were aired in a joint
position paper by the TMAP, the Action for Economic Reforms,
American Chamber of Commerce in the Philippines, Business Processing
Association of the Philippines, Employers Confederation of the
Philippines, Financial Executives Institutes of the Philippines,
Management Association of the Philippines, Makati Business Club,
Philippine Chamber of Commerce and Industry, Philippine Institute of
Certified Public Accountants, Philippine Inter-Island Shipping
Association, Philippine Liner Shipping Association, People
Management Association of the Philippines and Public Services Labor
Independent Confederation.
One of the IRR provisions declares that
income-tax exemptions for MWEs and increases in personal and
additional exemptions would take effect on July 1, next year.
The TMAP pointed out that RA 9504 is a social
legislation passed by Congress to grant “immediate relief” to
the economic plight of people during times of high fuel costs
driving up inflationary pressures. It said the benefits of the law
should be made available in full for the year 2008.
“To make the income tax exemption and increase
in personal and additional exemptions available only from July 1,
2008 [violates] the forgoing intent,” said the TMAP, which groups
tax lawyers and accountants of the country’s largest companies.
In addition, the proposed IRR limits the
coverage of the law by adding the condition that an employee
receiving additional income—like commissions, fringe benefits in
excess of the statutory tax-exempt amount of P30,000—shall not be
considered an MWE and shall be taxed for his entire income.
“By imposing limitations that effectively
deprive MWEs of the tax exemption accorded by law, the BIR oversteps
the bounds of law which it seeks to implement,” the TMAP said in
its letter to Teves. “It is a settled rule that administrative
agencies such as the BIR may not, by rules and regulations, amend,
alter, modify, supplant, enlarge or limit the terms of the statute
they are tasked to implement.” TMAP cited the case of Commissioner
of Internal Revenue v. Court of Appeals, 240 SCRA 368 (1995).
The TMAP said the additional requirement that
taxes the entire income versus simply taxing the amount in excess of
P30,000 discourages worker productivity.
RA 9504 also requires employers to submit to the
Department of Labor and Employment (DOLE) offices quarterly
alphalists of their MWEs and their MWEs with hazard pay. The DOLE
will in turn submit the lists to the BIR.
Moreover, employers that used to submit
consolidated alpha lists will now have to submit the same on a
regional basis, while all employees are required to file
registration update forms along with supporting documents. Failure
to file these forms will result in zero exemption, according to the
draft IRR, the subject of recent meetings between the Department of
Finance (DOF) and the BIR and the private firms.
“The administrative requirements imposed by
the draft revenue regulations are an administrative nightmare,”
said the TMAP, calling them “unnecessary, and contrary to the
characteristics of a sound tax system.”
TMAP officials are scheduled to meet with DOF
representatives Friday in order to clarify issues on RA 9505’s
implementation. Hopefully, their discussions would lead to
corrections in the IRR’s defects.
dansoy26@yahoo.com
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