P70,000 tax-free bonus still not certain despite House approval

MANILA, Philippines – The proposed increase in the amount of tax-free Christmas bonus or 13th month pay from P30,000 to P70,000 is still not certain despite its approval by the House of Representatives.

This is because the Department of Finance (DOF) continues to oppose it and would most likely ask President Aquino to veto or reject it if both the House and the Senate pass the bill containing the increase.

Finance Secretary Cesar Purisima warned lawmakers yesterday that the proposal would deprive the government of billions in taxes.

“The estimate is between P40 billion and P60 billion. If it is P60 billion, that is equivalent to our CCT (conditional cash transfers to the poor) program, which is P62 billion,” he said.

“It’s not necessarily CCT that will be affected, but it will lessen our ability to fund government programs. If they reduce the tax take, they should give us the options to recoup it,” he said.

He urged lawmakers to review the tax structure as a whole and not consider piecemeal proposals.

“Any measure that will increase exemption will reduce revenue, that is why we are suggesting that the approach must be holistic. But of course the power is within the Congress, we just give them our views,” he stressed.

Commenting on Purisima’s statements, Marikina Rep. Romero Federico Quimbo said the finance secretary’s assertion that the proposed higher amount of tax-free bonus would result in a revenue loss of up to P60 billion “is a scare tactic that is not founded on any factual basis.”

“There is no truth to that amount. We’ve done every possible computation and that amount is simply kalokohan. We’ve likewise consulted a number of finance people and academics on the matter and all have reached the same conclusion: the impact on the revenue bottom line is not at all significant. At most, it will be around P2 billion,” he said.

He said P2 billion “is a small price considering the increase in purchasing power that the taxpayer will acquire because of the increase in take-home pay.”

“The DOF has to recognize that the current ceiling has not been adjusted since 1994. In fact, the DOF has been remiss in its statutory duty to periodically adjust this ceiling in accordance with inflation, as instructed by the law itself,” he added.

Quimbo pointed out that the adjustment in the amount of tax-free “is just a first step in the overhaul of our tax system, which the House is determined to do.”

“The current system is unjust both as to the rate and application. The rates are the highest in ASEAN (Association of Southeast Asian Nations) and are shouldered practically by just the fixed-income salaried workers. A tax reduction is the best and most direct action towards inclusive growth,” he stressed.

“If the indigent members of society are rightfully being supported through the CCT program, why can’t we help the source of the CCT: the common taxpayer?” he asked.