House mulls higher tax-exempt ceiling for bonuses

House ways and means panel chair Rep. Romero Quimbo: The ceiling needs to be increased. FILE PHOTO

MANILA, Philippines—The House of Representatives is looking to raise the tax-exempt amount of workers’ bonuses to P40,000 up to P75,000, despite warnings from finance officials the revenue loss to the government would be at least P10 billion.

The House ways and means committee’s technical working group (TWG) is currently reviewing nine bills seeking to increase the tax exemption ceiling for the 13th-month pay and other bonuses granted employees, and validating data from the Bureau of Internal Revenue (BIR) on the monetary impact of such legislation.

At present, the tax exemption ceiling for the 13th-month pay and other bonuses is P30,000. The proposal is to exempt bonuses of P40,000 up to possibly P75,000 from being taxed.

Once the validation of BIR data is complete, the TWG will give its proposed new ceiling to the committee for approval, said ways and means panel chair Rep. Romero Quimbo.

Quimbo said the new ceiling should be between P40,000 and P60,000.

“The ceiling needs to be increased, the only issue is how much,” he said.

Finance officials have opposed any increase in the tax-exempt amount, saying the government stands to lose P10 billion for every P10,000 hike in the ceiling.

If the tax-exempt ceiling was raised to P40,000, the government would lose P10.3 billion; at P50,000, the loss would be P20.4 billion; at P60,000, some P30 billion would be lost, and if raised to P75,000, the loss would be P43.6 billion.

Quimbo, however, said an increase was warranted because the P30,000 ceiling was set two decades ago and had never been adjusted for inflation.

“By simply looking at the purpose of the 1994 exemption, it becomes more imperative that we make the adjustment today,” he said.

Quimbo noted that the law setting the ceiling was passed to allow the workers who made at least P30,000 a month to enjoy their bonuses in their entirety, especially during the holidays. At the time, government workers up to salary grade 32 enjoyed the exemption.

But because of salary increases in the following years, government workers up to salary grade 11 now benefit from the exemption.