Lawmakers back bigger tax-exempt year-end bonus

Posted at 03/21/14 8:22 AM

MANILA - More members of the House of Representatives are supporting the proposal to increase the amount of tax-exempt yearend bonuses, including the 13th-month pay, from P30,000 to P75,000.

The latest to file a bill seeking the adjustment is Estrellita Suangsing of Nueva Ecija.

Several House members, including Angelina Tan of Quezon, Raneo Abu of Batangas, Jerry Treñas of Iloilo City, Abigail Binay of Makati, and Antonio Tinio of party-list group Alliance of Concerned Teachers, have earlier introduced similar measures.

In the Senate, Sen. Ralph Recto is the principal author of a bill increasing the amount of tax-exempt bonuses to P75,000.

In Bill 3974, Suansing said the proposed increase “would not only reward the workers of the state and private sector who tirelessly toil in contributing to the income generation of the government and delivery of basic services to the people, but also would greatly help in boosting these workers’ morale and improving their living conditions.”

She said while there would be revenue foregone with the approval of the proposal, this could be recouped through taxes on consumables like the 12-percent value added tax, since many recipients of bonuses are expected to spend their increased bonuses.

“The P75,000 ceiling will be more responsive to the needs of the times,” she said.

She pointed out that the present P30,000 limit was set in 1994, when the National Internal Revenue Code was enacted.

“At that time, the lowest monthly basic salary for government employees was P2,800 for Salary Grade 1, Step l, level and the highest was P25,000 for Salary Grade 33 (the basic pay of the President),” she stressed.

Since then, basic salaries in the bureaucracy have been adjusted several times, such that the lowest pay is now P9,000 (Salary Grade 1, Step 1) and the highest is P120,000 (Salary Grace 33), which is President Aquino’s salary,” she added.

In the case of Tan of Quezon, aside from proposing that the tax-exempt cap be increased to P75,000, she is suggesting that the limit be adjusted automatically adjusted every three years based on the consumer price index.

Tan said the present limit has remained the same for 20 years because apparently, there is no automatic adjustment mechanism in the law.

She said the amount of tax-exempt bonuses should be increased periodically even just to recoup the income that is lost due to inflation.

“The P30,000 in 1994 may just be P15,000 or P10,000 or even less in value today,” she stressed.

The tax-exempt bonus increase proposals are pending with the committee on ways and means, chaired by Marikina Rep. Romero Quimbo.

Aside from these measures, in the Senate, Sen. Juan Edgardo Angara has filed a bill seeking to cut individual and corporate income taxes over a three-year period, from 2015 to 2017.

Under the Angara bill, individual income tax rates would be reduced from the present 32 percent to 25 percent by 2017.

In a television interview on Tuesday, Angara said he has spoken to Quimbo about his proposal and that the latter was open to the idea of reducing tax rates for individual and corporate income earners.

“They are open to it. They just want to give priority to the increase in the amount of tax-exempt bonuses,” he said.