Senate tax exemption bill to cover holidays, OT, hazard pay

MANILA, Philippines – The Senate ways and means committee wants the tax exemption bill to include holiday, overtime, and hazard pay of minimum wage earners.

Sen. Francis Escudero, committee chairman, hoped that their counterparts at the House of Representatives will agree to the Senate’s move to replace the provision on the simplified net income tax system or SNITS with the Optional Standard Deduction (OSD) scheme for professionals and business corporations.

Escudero also wants withholding taxes removed for overtime, holiday, hazard and night shift pay to boost the take-home pay of minimum wage workers.

Department of Finance (DOF) figures submitted to the ways and means committee showed that the government stands to lose about P13.26 billion under the proposed tax exemption measure.

But Escudero said the department has estimated that the government will be able to improve tax collection efficiency through OSD, which translates from P5 billion to P19 billion efficiency between three to 10 percent on level of availment of corporations alone.

“The (exemption) rates are the same. We did not change it. They have SNITS, we don’t want it. We have OSD. In the Senate version, we explicitly discussed the exclusion of tax on overtime, hazard, night shift and holiday pay for minimum wage earners. This is acceptable to the DOF because the revenue loss is very minimal anyway. Why will they remove such benefits from our workers?” Escudero said in an interview.

Explaining the OSD scheme to professionals like lawyers and doctors, Escudero said they will be allowed deduction of 40 percent based on their gross receipts.

Escudero said the Senate will tackle the tax exemption bill and pass it into law hopefully by next week with minor discussions with their House counterparts in the bicameral conference level.

“It’s not a question of giving up. At the end of the day, you have to balance two conflicting interests and provide relief for our workers who are affected by the high prices of commodities without adversely affecting the revenue scheme of the government. So whichever way you do it, what is important is that you are able to achieve these two goals,” said Escudero, who met last Wednesday with the technical working group (TWG) and representatives of the DOF, National Labor Relations Commission, and the Bureau of Internal Revenue (BIR) on the revenue measure.

In another interview, Senate President Manuel Villar Jr. reiterated the swift passage of the tax exemption measure at the Senate. “We will pass it as soon as we can. Our countrymen need the relief especially now that the prices are going up,” Villar said, adding though that he will have to discuss with Escudero the concerns on OSD.

The Senate received last Tuesday the House version of the tax exemption bill, which by DOF estimates, will even increase government’s revenue collection by P400 million under the OSD scheme.

“It is just right we tackle how to improve revenue collection in lieu of the lost revenue to be incurred with the exemption bill,” Escudero said, which is why the Senate is working on the 40 percent OSD on gross receipts for individuals.

Based on DOF estimates, the income derived from the OSD scheme would be enough to cover the losses on the exemption for minimum wage earners.

Meanwhile, Villar wants judges, prosecutors, and public attorneys assigned in far-flung areas to have hazard pay in addition to the common recommendation of increasing the salaries of those serving in the judiciary.

Villar made the suggestion after he attended the first organizational meeting of the newly constituted Judiciary, Executive and Legislative Advisory and Consultative Council (JELACC) in a bid to give equal opportunity to poor litigants and the people who are in need of legal assistance.