Abad on tax cut: Up to Congress

MANILA, Philippines – The Department of Budget and Management (DBM), in recommending a new round of salary increase for government personnel, did not take into account the proposal to cut income tax as such is a matter only Congress can resolve.

“It’s beyond us. It is first and foremost a policy issue that must be resolved by Congress,” Budget Secretary Florencio Abad told reporters yesterday after a hearing on the proposed pay increase.

He was responding to comments from certain lawmakers that the salary increase would be more meaningful particularly for those with low pay if it were accompanied by a reduction in income tax.

President Aquino met on Monday with Speaker Feliciano Belmonte Jr. and Senate President Franklin Drilon on moves in the House of Representatives and the Senate to adjust the rates for inflation. The rates have remained unadjusted since 1997.

Based on calculations made by the Tax Management Association of the Philippines, workers who paid 10 percent in income tax 18 years ago are now paying about 20 percent.

The President told Belmonte and Drilon that he would think about their inflation-based rate adjustment proposal.

Abad said the proposed new round of salary adjustment does not include a tax relief, though he stressed that the mid-year 14th month bonus and year-end performance bonus of up to two months of those with low pay would be “fully tax exempt.”

That is because the law exempts bonuses of up to P82,000 from income tax, he said.

Government workers have criticized the salary increase proposal, saying it heavily favors those already receiving fat salaries.

Under the DBM-drafted measure, the president, the highest-paid official, will get an increase of nearly P280,000 a month, while the lowest-paid state worker will receive just a small fraction of that – a little over P2,000.

The salary of President Aquino’s successor will soar from P120,000 to P399,739 in four years. The President holds Salary Grade 33.

At the bottom of the salary structure is the lowest-paid employee, who holds Salary Grade 1. His basic pay would increase from P9,000 to P11,068 or by P2,068 over the four-year implementation period for the new round of salary upgrading.

Aquino and incumbent members of Congress will not benefit from the proposed SSL5. They are banned by the Constitution from receiving any salary hike that they approve.

Next to the President in terms of pay are four officials who hold Salary Grade 32. They are the Vice President, Senate president, Speaker of the House of Representatives, and the chief justice.

Their salary will go up from P103,000 to P353,470.

Salary Grade 31 is assigned to Cabinet members, senators and congressmen, justices of the Supreme Court (SC), and chairmen of constitutional commissions.

Their pay will increase from P90,000 to P295,191.

According to the Commission on Audit report on gross compensation received by officials in 2014, Cabinet members earned from P1.7 million to P3.2 million, including allowances.

SC justices took home between P4 million and P6.3 million. The bulk of their compensation was in the form of allowances. As members of the Presidential Electoral Tribunal, which is the Supreme Court itself, they drew allowances of nearly P1 million, which was almost the same amount as their basic salary.