Senate eyes law exempting from tax 13th month pay of up to P75,000

Senate President Franklin Drilon and Senate President Pro Tempore Ralph Recto. INQUIRER FILE PHOTOS

MANILA, Philippines—Congress will pass a bill increasing the amount of 13th month pay that will be exempted from the income tax from the present P30,000 to P75,000, Senate President Franklin Drilon said on Tuesday.

Senate Bill No. 256, authored by Senate President Pro Tempore Ralph Recto, was one of the items discussed in the legislative agenda Drilon, Speaker Feliciano Belmonte and other congressional leaders discussed two weeks ago.

Drilon made the announcement of congressional support to Recto’s bill despite the opposition of the Bureau of Internal Revenue that warned of P43 billion in lost revenues if the measure were to be passed.

Drilon and Recto are both members of President Benigno Aquino III’s Liberal Party.

Drilon said senators and House members have been aware of the need to review old provisions of the law “to provide relief to state and private workers whose purchasing power has been shrinking for years due to inflation, but still have had to deal with the consequences of an outdated law.”

“The law was passed 20 years ago, and obviously, things have greatly changed,” Drilon said in a statement.

Drilon was referring to Republic Act No. 7833 that imposed the P30,000 cap on tax-exempt bonuses in 1994 when the lowest monthly basic salary for government employees was at P2,800, while the President of the Philippines received P25,000 per month.

“[Such figures are] no longer reflective of current economic realities, thus making it even more difficult for the average Filipino worker to make both ends meet for him and his family,” Drilon said.

Drilon said the basic salary for government employees has been pegged at P9,000, with the highest salary reaching P120,000 per month.

“While most of the priority bills right now focus on macroeconomic progress, we have to make sure that necessary bills such as SBN 256 will also receive the required resources and attention towards their passage, for the sake of our countrymen,” Drilon said.

“Our country’s laws must always prioritize the improvement of the living standards of its citizenry. Bills like this are necessary to address the real-time concerns and immediate demands of our people,” he added.

Drilon said Recto’s SBN 256 “is one of the most prominent pro-consumer legislation which will receive urgent legislative attention due to its direct effect to millions of Filipino workers around the country.”

BIR commissioner Kim Jacinto Henares in a hearing of the Senate committee on ways and means in December warned that the government would lose P43 billion if Recto’s proposed measure became law.

Henares saw the need to keep the existing tax systems intact; otherwise, Congress should come up with new measures that would make up for the billions to be lost due to the higher ceiling on 13th month pay tax exemption..

Henares indicated that the P33 billion in expected revenues from the recent passage of the sin tax law would be immediately wiped out should the exemptions take effect. She stressed the fact that the sin tax law was passed only after 15 years of lumbering through Congress.

“I’m going to play the bad guy in this committee hearing. Because my general policy is that as of now, we’re still on a deficit. So if you look at it from an ordinary household, we’re still borrowing to live,” Henares told the hearing chaired by Sen. Juan Edgardo Angara.

“If we look at prudence, you do not eat away funds unless you are already at ahead a bit. And then you agree to tighten up on certain things. So generally that’s my opening statement for the hearing as a whole and of course we’re faced with a P130-billion thing so we’re in between the rock and the deep blue sea,” Henares added.

Henares was referring to the need to bankroll the P130-billion Congress set aside in the 2014 national budget for the rebuilding of areas affected by natural calamities, particularly the provinces hit by supertyphoon Yolanda (Haiyan) and giving wage-earners a much needed relief in the wake of recent spikes in the prices of electricity and fuel.

Recto said the higher exemptions on the yearend bonuses would be a boon to the economy despite the revenue losses the government would likely suffer.

“By and large a lot of this money will be used to be spent also on the Christmas season, the holiday season and that is spent on many activities.  For example, if they have the house renovated, that will have a huge multiplier effect,” Recto said.

“That same one peso will be spent 17 times.  Sometimes, it is more efficient to leave it with the private sector, or in this case, the pockets of our workers and let them determine how to spend the money because they know how to spend the money better than the government can,” Recto added.

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