Minimum-wage earners still have to pay taxes, lawmaker says

President Arroyo’s order exempting minimum wage earners from the 10-percent withholding tax does not mean these taxpayers will not have to pay taxes, the chairman of the House ways and means committee clarified yesterday.

"It only means that their employers will not be deducting the 10-percent tax from their salaries from January to November. But in December, workers will have to pay the entire amount of income taxes due for the whole year," said Tarlac Rep. Jesli Lapus.

He said the President cannot exempt any taxpayer from paying taxes since that power belongs exclusively to Congress.

Lapus said the presidential order would particularly benefit those whose annual incomes are about the level of their personal tax exemptions, plus deductions for dependent children.

In the case of these taxpayers, they will have a zero-zero balance at the end of the year, meaning they will not have to pay any income tax, he added.

But he pointed out that for those whose earnings are greater than their tax deductions, they would have to pay the appropriate income taxes.

The presidential order takes effect next month. Minority Leader Francis Escudero said Malacañang, in announcing the order, made it appear that workers would be exempted from paying taxes.

"The announcement was misleading and deceptive," he said.

He agreed with Lapus that the presidential directive did not spare minimum-wage earners from paying taxes.

He said workers who would have to pay a huge amount such as P10,000 or even P5,000 at the end of the year would rather have this payment deducted as their monthly withholding tax instead of making a huge one-time payment.

"If my tax is P3,600, I would choose to pay P300 a month instead of scrounging up P3,600 at the end of the year. A worker would have difficulty setting aside that entire amount in December, when he would have many Christmas-related expenses," he said.

The supposed exemption from the 10-percent withholding tax is not really a tax relief measure, as Mrs. Arroyo would have it appear, Escudero stressed.

For his part, Deputy Minority Leader Rolex Suplico expressed doubts on whether the President had the power to suspend the collection of the withholding tax.

"She is duty-bound under the National Internal Revenue Code to collect the 10-percent withholding tax. She cannot refuse to do that duty without violating the law and her oath of office," he said.

Instead of a "deceptive palliative" like a supposed exemption from the withholding tax, Escudero and Suplico urged the majority bloc in the House to give priority to and approve proposals to increase the amount of tax deductions of millions of fixed-income earners or reduce their tax rates.