The Senate committee on ways and means, chaired by Sen. Sonny Angara, has reported out for floor debates the bill that seeks to raise the tax exemption cap for 13th month pay and other benefits, which would increase the takehome pay of millions of Filipino workers.
Senate Bill 2437, which is a consolidation of five Senate bills authored by Senators Angara, Ralph Recto and Lito Lapid, intends to raise the ceiling of the tax exemption to P75,000.
Its counterpart measure from the House of Representatives, House Bill 4970, sponsored by Marikina Rep. Miro Quimbo, raises the ceiling to P70,000, a little lower than the Senate version.
Currently, Republic Act 7833 mandates that the 13th month pay and other benefits, such as productivity incentives and Christmas bonuses not exceeding P30,000 given to both government and private sector employees, are exempted from tax.
The present ceiling was set by a law enacted almost two decades ago when the lowest monthly basic salary for government employees was P3,800 while the daily minimum wage in the National Capital Region (NCR) was P145.
Now, given the adjustments made in the basic salaries, the lowest monthly pay for government workers stands at P9,000 while the minimum wage in the NCR today is at P466.
“Even without being promoted, salaried workers find themselves being taxed more because as their salaries rise due to legislated wage increases, the tax-exempt ceiling remains unchanged,” Angara stressed.
During the three public hearings on the said bills, the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) have maintained their opposition to the proposed measure, saying that the government may lose some P43 billion in revenues, especially if no countervailing measure is passed to compensate for the loss.
But contrary to the DOF and BIR’s projections, a study from the University of the Philippines School of Economics showed that increasing the ceiling would yield a maximum revenue loss amounting to only P6 billion.
“We are not deaf to the fiscal needs of government. But today, the workers cry social justice. What the government loses on the one hand, it could recoup on the other hand through consumption taxes and taxes on investments,” Angara said.
The lawmaker also pointed out that the finance secretary, upon the recommendation of the BIR Commissioner, has the power to increase the tax-exemption ceiling under Section 32 of the National Internal Revenue Code of the Philippines, but has failed to exercise such power and has allowed the ceiling to remain unadjusted to inflation.
“We can’t wait anymore for the secretary of finance to exercise such power delegated to him by Congress some 20 years ago. This is why we are ardently pushing for the swift passage of this legislation and submitting the authority to raise the ceiling to the president,” he said.
The measure also mandates that adjustments be made every three years, taking into account inflation.
“Ultimately, the aim of this measure is to let taxpayers benefit more from the fruits of their labor. Government should not take away what Juan Dela Cruz has earned for himself and his family,” Angara concluded.