Support of Regional Dev’t Councils snowballs

Sen. Ralph G. Recto today reiterated his proposal to raise the tax exemption ceiling on Christmas bonuses and 13th month pay to P60,000 from the current threshold of P30,000 to give more spending power to employees celebrating the holiday season.

Recto said the tax imposed on bonuses and allowances exceeding P30,000 is outdated since it was pegged when the basic salary scale of state employees was only P2,800 and the salary of the Philippine President was only P25,000.

Currently, the basic pay scale of government employees is P8,287 while the salary grade of the chief executive is P120,000.
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“This is the kind of a one-tier increase that all advocates and lobbyists – foreign-funded or not – should be championing,” he said.

Recto stressed that slapping a tax on bonuses and allowances that exceed P30,000 is tantamount to treating a job well-done a “sin” and employers’ generosity a “felony.”

“A worker bound to receive a little more than P30,000 in bonuses and allowances should not be penalized with a tax. The tax is essentially a disincentive for workers aspiring for a higher pay scale that naturally comes with generous perks and bonuses,” he said.

The 1997 National Internal Revenue Code Section 32(B) Chapter VI states that private and government employees having bonuses beyond P30,000 were automatically subjected to income tax.

Recto’s Senate Bill 2879 seeks to shatter the threshold of P30,000 so that bonuses and allowances up to P60,000 would be exempt from income tax.

The senator said if inflation is factored in, the P30,000 tax exemption ceiling is practically worth P15,000 today as computed by the National Economic Development Authority (NEDA), which he chaired before getting elected to the Senate in 2010.

The proposed measure and other important Senate bills were the ‘collateral damage’ of the recent impeachment trial. Congress is racing against time to pass a new sin tax law and enact the P2- trillion 2013 national budget before the Christmas break.

“With time running out for the approval of this bill, I could only look forward to its serious consideration in 2013 in time for the next holiday season. And who would say that Number 13 is the unlucky number?” he said.

At least three Regional Development Councils (RDCs) have expressed support to the Recto bill, the latest of which is the RDC –National Capital Region. The first two RDCs are that of Region 2 and Region 6.

The RDC-NCR, in a recent meeting headed by Makati Mayor Junjun Binay, RDC-Metro Manila chair, even proposed a higher tax exemption threshold of P80,000 or P20,000 higher than the Recto proposal.

To fast track approval, the RDC-NCR will convene a Technical Working Group composed of the UP-NCPAG, labor leaders and Metro Manila LGUs to be assisted by the BIR, National Tax Research Center (NTRC) and Civil Service Commission.

In his bill’s explanatory note, Recto argued that the prevailing ceiling for tax exemption “does not mirror prevailing circumstances and that the “ceiling of P30,000 does not apply today as it did when it was incorporated in the tax code.”

“The law should always be responsive to the needs of the people. An increase in the ceiling of this particular tax exemption is one of the reliefs the people need during these difficult times,” Recto said.