BIR urged to raise cap on tax-exempt 13th-month pay, bonuses, allowances

Bureau of Internal Revenue building. INQUIRER file photo

MANILA, Philippines — Rank-and-file employees of the Department of Agrarian Reform (DAR) are petitioning Internal Revenue Commissioner Kim Henares to raise the ceiling of taxes levied on all perks and allowances, including the 13^th-month pay.

They said employees of national agencies faced a “bleak Christmas” due to the decision of the Bureau of Internal Revenue (BIR) to tax all benefits for government workers in excess of P30,000.

Last week, the DAR management implemented a BIR memorandum circular clarifying the “taxability” of the benefits granted to government employees’ organizations duly approved by the Civil Service Commission (CSC).

“It practically wiped out the December salary of the employees as the DAR management deducted in full taxes on fringe benefits over the P30,000 ceiling,” the DAR Employees Association (DAREA) said in its petition.

The P30,000 ceiling was set by Republic Act 7833 some 30 years ago.

The DAREA said the circular failed to consider that under the law, the ceiling of P30,000 “may be increased through rules and regulations issued by the Secretary of Finance, upon recommendation of the Commissioner, after considering among others, the effect on the same of the inflation rate at the end of the taxable year.”

It said the BIR also failed to consider a section under the law that “benefits given to the rank and file employees, whether granted under a collective bargaining agreement or not, are not taxable.”

“However, the [Department of Finance] without the recommendation of the BIR Commissioner failed to consider the rate of inflation and issue recommendations to raise the ceiling and make it more beneficial to government workers,” the DAREA said.

The union also circulated a separate petition by government workers seeking the intervention of Congress on the tax ceiling.

It noted that the average take-home pay of rank-and-file employees ranged only from P9,000 to P15,000.

“The BIR decision will affect an estimated 1.3 million government workers in the country,” it said.

“It is sad that while one government agency, the Civil Service Commission (CSC) encourages government workers to negotiate with management for fringe benefits, other agencies like the Department of Budget and Management (DBM) imposes incentive caps and the Bureau of Internal Revenue delivers the death blow with taxes on these incentives,” it added.

The workers also said they welcomed the filing by Sen. Ralph Recto of a bill increasing to P75,000 the exemption from income tax.

“Hopefully, a champion of a similar bill will rise from the House of Representatives,” they said.

“The administration of President Aquino can show his compassion for the lowly rank and file employees by certifying the bill as urgent,” they said.

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