Internal Revenue Commissioner Kim Henares. INQUIRER FILE PHOTO
MANILA, Philippines – An association of judges together with court employees in Manila asked the Supreme Court to stop the Bureau of Internal Revenue from implementing a new regulation that would impose taxes on previously non-taxable benefits such allowances, bonuses and other fringe benefits received by state employees, including those in the judiciary.
In a 48-page petition for certiorari and prohibition with application for the issuance of a temporary restraining order and or a writ of preliminary injunction dated August 19, petitioners Manila RTC Branch 173 Judge Armando Yanga, president of the Regional Trial Court Judges Association of Manila and Ma. Cristina Carmela Japson, president of the Philippine Association of Court Employees-Manila Chapter, also asked the High Court to nullify the BIR Revenue Memorandum Order No. 23-2014 it issued on June 20 this year.
Yanga and Japson filed the petition on their personal capacity and as head of their respective association.
Under RMO No. 23-2014, all benefits received by the employee and officers of the government shall be subject to 30 to 32 percent tax. The order was implemented last July 7.
Petitioners said BIR Commissioner Kim Jacinto Henares has no authority to issue the RMO.
Under the National Internal Revenue Code, petitioners pointed out that the Secretary of Finance is vested with such authority. The BIR commissioner only has the authority to make recommendations.
“All of these RMOs were issued only by Respondent BIR Commissioner, without the participation, much less the approval, of the Secretary of Finance. These RMOs are illegal, null and void and without justification and legal basis,” the petition said.
“The National Internal Revenue Code as amended, expressly vests the authority to promulgate all rules and regulations for the effective enforcement of its provisions on the Secretary of Finance. The only authority, if one can call that, given to the BIR Commissioner is to submit the recommendation for the issuance of those rules and regulations to the Secretary of Finance. And the illegality of the RMOs is compounded by the clever attempt to disguise them as mere memoranda, when in truth and in fact, they are revenue regulations,” it added.
They added that Henares also committed grave abuse of discretion amounting to lack or excess of jurisdiction when she issued the assailed order, especially since the benefits that the agency wanted taxed have not been subjected to any withholding tax since the effectivity of the National Internal Revenue Code (NIRC) of 1997.
“(Henares) committed grave abuse of discretion amounting to lack or excess of jurisdiction in the issuance of the assailed RMO when it subjected to withholding tax the special allowances for the Judiciary provided under Republic Act 9227, which are considered fringe benefits under the NIRC not subject to any fringe benefit tax as they are granted to the members of the Judicial branch to guarantee the independence of the Judiciary,” petitioners said.
Aside from this, the petitioners said their right to due process has also been violated when Henares issued the assailed order without them being afforded the chance to air their side on the matter.
The petitioners further argued that Henares usurped the power of the Finance secretary when she named the officers and their position that has the power to implement to withhold and remit taxes, when it was clearly vested in the latter under Executive Order 651 issued in 1981 by then president Ferdinand Marcos, as well as to impose penalties on them if they failed to do so.
Among the public officers given authority by the assailed order to withhold and remit taxes are the provincial treasurer and governor, city accountant and city mayor, municipal treasurer and municipal mayor, barangay treasurer and barangay captain and for government-owned-and-controlled-corporations, national government agencies and other government offices their respective chief accountant and head of offices.
“We respectfully submit that this plainly illegal act should be struck down. RMO No.23-2014 deserves no less than a categorical declaration of its nullity and should forthwith be annulled and declared null and void, as it was obviously issued with grave abuse of discretion amounting to lack or excess of jurisdictions,” the petition added.
The petitioners also raised the same arguments on the inclusion of the benefits to be imposed withholding taxes the Additional Cost of Living Allowance (Adcola).
“The assailed RMOs directive to subject to withholding tax the Special Allowance and the ADCOA is not only a violation of Section 33(A) of the NIRC, but more importantly, it likewise constitutes a contravention of the guarantee of judicial independence as declared in RA 9227,” the petition added.
They also assailed the BIR for including cash gifts, loyalty cash award and clothing allowance as taxable income.
They argued that these are not taxable under Section 33 (A) of the NIRC.
Likewise, the petitioner said including the productivity incentive benefit, Supreme Court Christmas allowance, anniversary and milestone bonuses, grocery allowance and year-end bonus in the coverage of the assailed regulation would violate Section 32 (7) (e) of the NIRC.
The petitioners also said that the BIR breaches or violated the power to legislate laws of Congress, including tax laws or regulations.
“RMO No. 23-2014 is not a law, yet it imposes taxes on items not taxed by any law, by the simple expedient of withholding income taxes thereon. It is not even a regulation to implement a tax law. It is, in fact, a tax law promulgated only by Respondent Commissioner. And even if it were only a revenue regulation, it is nonetheless illegal and unauthorized because, as already stated, it was not promulgated and signed by the Secretary of Finance,” they added.
Early this month, various associations of government employees led by Confederation for Unity, Recognition and Advancement of Government Employees (Courage) also asked the High Court to stop the implementation of RMO 23-2014.
Joining Courage in the petition are the Judiciary Employees Association of the Philippines (Judea-Phils.), Sandiganbayan Employees Association (SEA), Sandigan ng mga Empleyadong Nagkakaisa sa Adhikain ng Demokratikong Organisasyon (S.E.N.A.D.O), Association of Court of Appeals Employees (ACAE), Department of Agrarian Reform Employees Association (DAREA), Social Welfare Employees Association of the Philippines-DSWD, Department of Trade and Industry-Employees Union, Kapisanan Para Sa Kagalingan ng mga Kawani ng MMDA, Water System Employees Response, Consolidated Union of Employees of the National Housing Authorities, and the Kapisanan ng mga Manggagawa at Kawani ng Quezon City.
The high court has already directed the Finance department and the BIR to answer that particular petition within 10 days.
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