Hike in tax exemption ceiling for Christmas bonus backed

MANILA, Philippines - The Department of Labor and Employment (DOLE) supports proposals to increase the tax exemption ceiling for the 13th month pay and Christmas bonus of employees.

“The DOLE goes along with the demand of workers as long it won’t have huge implications on revenue collections,” Labor Secretary Rosalinda Baldoz yesterday said.

She said it appears that increasing the tax exemption would not adversely affect revenue collection since there are only few wage and salaried workers.

Baldoz noted that organized labor groups had long been demanding an increase in the tax exemption cap.

“The demand of labor for higher tax exemption cap is already being studied by the Department of Finance and the Bureau of Internal Revenue, I just don’t know the results,” she said.

Baldoz said President Aquino ordered the study because he is sympathetic to workers who have been paying their taxes faithfully.

During the Senate hearing on proposed tax breaks, Labor Assistant Secretary Joji Aragon said increasing the ceiling on tax exemptions for the 13th month pay and Christmas bonus “may be something to consider, to discuss about, in finding ways and means to empower workers.”

“This has been overtaken by time. Two decades have passed and we still have not adjusted this, so maybe it’s time to review this and find out if this is appropriate based on the adjustments in the consumer price index, currency depreciation,” she said.

Under Senate Bill 256 filed by Sen. Ralph Recto, the National Internal Revenue Code would be amended to raise the ceiling on exemptions for the 13th month pay and Christmas bonus from P30,000 to P75,000.

Recto noted that the P30,000 ceiling was introduced in 1994 when the President’s salary was only P25,000 and the lowest grade employees got only P2,800 a month.

“While there have been increases in the legislated pay scale of private and government personnel, the P30,000-cap for the income tax exemption of the 13th month pay and Christmas bonuses have remained the same. This amount no longer mirrors the prevailing circumstances,” he said.

Reduced tax collection

Bureau of Internal Revenue Commissioner Kim Henares, however, warned that Recto’s bill would reduce government revenues by at least P43 billion a year.

She noted that if the government “gives away something, you must have something to replace it.”

Henares said additional tax exemptions at this time would place the country at risk of losing its investment grade status.

“If we lose that (investment grade status), we could lose our economic development and when our economy crashes, the first who would be affected are the ordinary people,” she said during the Senate hearing.

She cited the report of credit rating agencies that one of the weakest points in the country’s economy is its tax collection effort.

Henares said the government could not afford to do anything to weaken its revenue collections while it is in a deficit position.

Recto said the grant of additional tax exemptions to employees would still benefit the economy because it would mean more money to spend, which in turn would spark economic growth.

“It is better to leave it in the pockets of the consumers and let them decide how to spend the money,” he said.

‘Stop preying on ordinary workers’

The Trade Union Congress of the Philippines (TUCP) said it supports Recto’s bill.

In a statement, the TUCP also urged Henares to stop preying on ordinary workers. “The people should train their guns on Customs and big corporate and business taxes and not on the working class,” it said.

Renelo Lastierre, secretary and spokesman of the Progressive Alliance of Capitol Employees of the Negros Occidental provincial government, said they are no longer excited to receive their Christmas bonus because of big tax deductions.

Provincial administrator Enrique Pinongan yesterday said tax deductions of Negros Occidental employees range from P2,000 to P19,000 depending on their salary grade.

He said some employees will receive a measly P2,000 out of their P38,000 bonus because payment for their loans from their cooperative will also be deducted.

“Our message to Kim Henares is have mercy and a heart for the public sector workers. The bonus is the only reward that the government can give to our state workers who contribute to the income generation of the government and its delivery of basic services to the people,” he said.

Lastierre also pressed for the release of their Collective Negotiation Agreement Incentive, which will be sourced from the savings of the provincial government’s Maintenance and Other Operating Expenses. – With Marvin Sy, Danny Dangcalan