New bill seeks larger tax exemptions 13th month pay, bonuses

Senator Ralph Recto. INQUIRER FILE PHOTO

MANILA, Philippines – Senator Ralph Recto has filed a bill increasing to P75,000 the amount of 13th month pay, Christmas bonus and other benefits to be exempted the payment of income tax.

Recto’s Senate Bill No. 256seeks the exemption for bonuses of up to P75,000, saying that the present ceiling was set by a law enacted almost 20 years ago.

“We owe it to the people to amend laws that tend to be more repressive rather than be beneficial to the people. In this bill, we intend to breathe life again to the spirit of the law that, during the time of its passage, intended to allow the people to enjoy more of their hard-earned money,” Recto said.

Recto said that if passed into law, “the increase in the tax exemption ceiling would translate to a higher take home pay for employees in the private and government sectors alike, particularly during the Christmas season, when the 13th month pay and other bonuses are usually released.”

The law currently exempts the mandatory 13th month pay from the payment of income tax, but only up to P30,000. Any amount in excess of P30,000 is subject to income tax.

Recto said his proposal was premised on the fact that the conditions prevailing in 1994 no longer applied to the present.

“At that time, the lowest monthly basic salary for government employees was P2,800 and that of the President of the Philippines was at P25,000,” Recto said.

Recto said that at present the basic salaries have been adjusted such that the lowest basic salary in pay structure, Salary Grade 1 Step 1, now stands at P9,000 and the President’s pay grade, Salary Grade 33, is at P120,000.

Recto added that the National Tax Research Center and National Economic Development Authority peg the exemption ceiling estimates as of 2011 at P72,000 and P75,000, respectively, if adjustments for inflation were reckoned from 1994.

Recto said his measure also provides that the ceiling of P75,000 shall be adjusted to its present value using the consumer price index as published by the National Statistics Office three years after the measure’s enactment and every three years thereafter.

“It is of paramount importance that our laws be responsive to the needs of the people. An increase in the ceiling of the 13th Month Pay and other benefits to be exempted from income tax is one of the reliefs the people need during these hard times,” Recto said.