The House ways and means committee has increased the ceiling of the 13th month pay and Christmas bonus that are tax-exempt to P70,000.
Its move came about after its chairman, Rep. Romero Quimbo of Marikina City (Metro Manila), approved Rep. Jerry Treñas’ House Bill 3678.
The existing ceiling is P30,000, which was set in 1994.
“Nowadays, the P30,000 ceiling is only as good as P14,000. We have to improve the purchasing power of our workers and help them enjoy their benefits. That is our main consideration for adjusting the tax exemption to P70,000,” Quimbo said during Wednesday’s hearing.
“It is adjusted to inflation based on the Consumer Price Index of the NSO [National Statistics Ofice]. It follows the mandate of the law that the ceiling has to be regularly adjusted based on inflation,” he added.
Quimbo contested the assertion of Commissioner Kim Jacinto-Henares of the Bureau of Internal Revenue (BIR) that the government will lose P1.5 billion in revenues if the ceiling on tax-free bonuses is increased to P70,000.
He said taxpayers’ greater purchasing power resulting from the new ceiling would generate P550 million in revenues for the government.
“The P3-billion estimate of government losses is exaggerated. We’ll get around P550 million in returns with increased purchasing power because people will pay taxes for purchasing goods and [availment]of services,” Quimbo added.
He urged the BIR and the Department of Finance to revise the bracket system that determines the taxable income of individuals.
Quimbo pitched his House Bill 4829, which provides that those with an annual income of less than P173,942 should not be taxed, while those who earn P173,942 to P445,063 should have an income tax rate of nine percent.
Those earning P445,063 to P10 million a year will have a 17-percent income tax rate, while a 30-percent rate will be imposed on those earning more than P10 million a year.
Under existing laws, 72 percent of income tax payments come from the middle class such as bank tellers, call center agents, soldiers, teachers and nurses.
Millionaires account for the remaining 28 percent.
“It’s archaic to say the least. The current tax system puts too much burden on the lowly taxpayer but little on the well-to-do,” Quimbo said.